Procedures consolidating foreign subsidiaries

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The consolidated balance sheet also includes foreign subsidiaries.However, it is sometimes difficult to convert the financial statements of a foreign subsidiary back into the parent company's currency. - Before Companies Act 2013, only listed company was required to do Consolidation.AS 21 says that if a company is required to do consolidation then consolidation is required to be done as per criteria set up in AS 21.More specifically, this Statement replaces FASB Statement No.8, Accounting for the Translation of Foreign Currency Transactions and Foreign Currency Financial Statements, and revises the existing accounting and reporting requirements for translation of foreign currency transactions and foreign currency financial statements.However, when reporting financial information, the parent company is required to submit financial statements that combine their information with that of their subsidiaries.These documents are called consolidated financial statements and allow the health of the group to be assessed as a whole, rather than piece-by-piece.

A stock corporation is engaged in income generating activities and is authorized to declare dividends. It is organized for charitable, religious, educational, professiona, cultural, fraternal, literary, scientific, social civil service, or similar purposes, like trade, industry, agricultural and like chambers, or any combinations thereof.- Earlier only listed companies was required to do consolidation as listing agreement required the same but with companies act 2013, sec 129 has defines financial statement to include CFS.Consolidation requirement under Companies Act, 2013 (‘Act, 2013’) Section 129 (3) read with Rule 6 of the Companies (Accounts) Rules, 2014 (Rules) provides manner of consolidation of financial statements of subsidiaries pursuant to Schedule III of the Act, 2013 and the applicable Accounting Standards.As per AS 21, Consolidated Financial Statement (CFS) is required to be prepared only for a 'group' of enterprises under the control of a parent. R 723 (E) dated October 14, 2014 and introduced the Companies (Accounts) Amendment Rules, 2014.As per the scope of AS-23 and AS-27 the application of equity method/proportionate method for consolidation of accounts of associate/ joint ventures respectively is required only when a company prepares consolidation under AS 21 The term ‘group’ has been defined in AS 21 as follows: The explanation to Section 129 (3) clearly states that for the purposes of this sub-section, the word “subsidiary” shall include associate company and joint venture Therefore, as per Section 129 of the Act, 2013 read with rules thereof, consolidation of financial statement is required in case a company is having subsidiary or associate or joint-venture company. As per the rule the consolidation requirement was exempted for a company not having subsidiaries but having associates or joint ventures (‘JVs’).

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