Guidance of treatment in consolidated books of holding co

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Querist : Anonymous

Querist : Anonymous (Querist)

12 February 2014 Guidance on Treatment of Excess of Investment in Subsidiary in the bks of Holding Co. over Share Capital and security Premium in the books of Subsidiary in Consol books.
Some history: in Q1 FY 14, in Subsidiary books Capital Reduction Scheme, we had written off all the brands against the Security Premium and Share Capital. This causes reduction in Security Premium and Share Capital. Accordingly we are adjusting the same in P&L Appropriation. Earlier (before Capital Reduction schm), the Investment in Subsidiary was = SC+SP of Subsidiary, therefore no question of GW or CR in Consol.

CA Deven

CA Deven (Expert)
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12 February 2014 NOT UNDERSTANDING YOUR QUESTION ...CAN YOU PLZ EXPLAIN IN A BETTER LANGUAGE ...WITH AN EG.

Querist : Anonymous

Querist : Anonymous (Querist)

12 February 2014 Ok.
in FY 13, Holding Co has investment of Rs. 100 against Share Cap + Sec Pre of Rs 100 (10+90 resp.) & Brands of Rs 70 in Subsidiary.
While consolidation, there is not GW or Capital Reserve on Consolidation since Investment = NW of Sub (SC + SP).

In Q1, FY 14: we got the Capital Reduction scheme approved from high court, Thereby the subsidiary had the Brands in its books (of say Rs 70) which we adjusted against SC + Security Prim). Therefore, SC + SP got reduced to Rs. 30.
Now while Consolidation of Books as per AS 21, Investment in Holding Co (Rs 100) and SC + SP (Net worth) in Subsidiary (currently of Rs 30).
now this Excess of Investment over Net Worth of Subsidiary (100 - 30 = 70), what treatment should we give in Consol books?
As per my opinion we should not create a GW on Consol since this NW is not of at the time of Acquisition, then what would be appropriate Treatment @ Consol Books

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Querist : Anonymous

Querist : Anonymous (Querist)