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AS 21 - Consolidation of Accounts

RAJU (LEARNER) (1089 Points)

25 July 2009

Dear Members,

I would like to know to whom AS 21- Consolidation of Accounts are applicable. As per the Accounting Standard 21, it is applicable to Level I Enterprises. However, all Level-I enterprises may not have Subsidiaries. AS 21 also clearly states that AS-21 has to be followed by those `who consolidate their accounts`

Please clarify as to which statute mandates the companies for consolidation. I could not find the provision in Companies Act. Please quote relevant section and statute.

Regards/Dharmaraju

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4 Replies

CA. SUDHARSAN K G (Chartered Accountant) (472 Points)
Replied 25 July 2009

Dear,

AAS - 21 is aplicable for Holding Companies only. this standard emerged to have an uniformity in reporting of Financial Statements. Hence u need not to confuse.

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Krutesh Patel (ACA) (727 Points)
Replied 25 July 2009

No statue has made consolidation compulsory even AS 21. As per Sec 212 of Companies Act, financial statements of Holding company should include financial statement of subsidery also. It has not made consolidation compulsory.

Only when we made consolidated financial statement, as 21 should be followed.

Nishidh Halani (Student) (24 Points)
Replied 26 July 2009

Dear,

Preparing Consolidated Accounts is not mandatory for any enterprises. It applies to holding companies who has their subsidiaries. It is applicable only when some company requires Consolidated Figures for some purpose for example bank, IPO or llisted companies.

Regards,

Nishidh

RAJU (LEARNER) (1089 Points)
Replied 27 July 2009

Thanks for the prompt replies.

I agree that it is applicable to Holding Companies and conclusion of your replies suggests that it is not mandatory but optional. However, the basis of consolidation itself will be defeated if the consolidation is not done. The holding company may not always consolidate if it is likely to affect the credit worthiness as a result of consolidation. In such an event it will be misleading for the users if substantial investment of holding company is with its subsidiary.

Regards

Dharmaraju