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Uniform accounting policy

CA Gaurav Ajit Potdar (Chartered Accountant) (846 Points)

25 March 2013

If Accounting Policies adopted by Subsidiary are not same as that followed by the holding Co. than is it ok if we just disclose the same while preparing consolidated accounts or we also have to make an adjustment in consolidated accounts to bring it inline with that of the holdig Co.

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3 Replies

Ayyswariya RG (Knowledge Seeker) (3711 Points)
Replied 26 March 2013

As per AS 21, Consolidated Financial Statements,

> Consolidated financial statements should be prepared using uniform accounting policies for like transactions and other events in similar circumstances. If it is not practicable to use uniform accounting policies in preparing the consolidated financial statements, that fact should be disclosed together with the proportions of the items in the consolidated financial statements to which the different accountingpolicies have been applied. (Para 20).

> If a member of the group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements when they are used in preparing the consolidated

financial statements (Para 21)

Hope it is useful.

Thanks.

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CA Gaurav Ajit Potdar (Chartered Accountant) (846 Points)
Replied 26 March 2013

Thanks R G ayyswariya but if the transaction are not of like nature than is it ok if we just disclose it in the notes or adjustments are also required.

Ayyswariya RG (Knowledge Seeker) (3711 Points)
Replied 27 March 2013

Para 12 of AS 21 says, Exclusion of a subsidiary from consolidation on the ground that its business activities are dissimilar from those of the other enterprises within the group is not justified because better information is provided by consolidatingsuch subsidiaries and disclosing additional information in the consolidated financial statements about the different business activities of subsidiaries.
For example, the disclosures required by Accounting Standard (AS) 17, Segment Reporting, help to explain the significance of different business activitieswithin the group.

Thus, additional information needs to be disclosed in d consoldidated financial statements about its subsidiaries in case of different business/transactions.