Consolidated Accounts as per AS 21

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Consolidated Accounts as Per AS 21

1. As per section 129 of Companies Act 2013,
A company having on or more subsidiary should prepare:
 Separate Financial Statement (SFS) and
 Consolidated Financial Statement (CFS)
It means, where an entity does not have a subsidiary but has an associate or Joint Venture, then such an
entity should also prepare CFS in accordance with AS 23 or AS 27 respectively.
As per Rule 6, of the Companies Act 2014, if a parent company of a wholly owned subsidiary is incorporated
outside India then it need not require to prepare CFS.

P limited P has 100% stakes in S Limited S Limited

incorporated outside Indian Co.
India

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Consolidated Accounts as per AS 21

In the preparation of consolidated financial statements, other Accounting Standards also apply in the same
manner as they apply to the separate statements.
2. This Standard does not deal with
(a) Methods of accounting for amalgamations and their effects on consolidation, including goodwill arising on
amalgamation (see AS 14, Accounting for Amalgamations);
(b) Accounting for investments in associates (at present governed by AS 13, Accounting for Investments );
and
(c) Accounting for investments in joint ventures (at present governed by AS 13, Accounting for Investments ).
3. Control:
(a) The ownership, directly or indirectly through subsidiary(ies), of more than one-half of the voting power of
an enterprise; or
(b) Control of the composition of the board of directors in the case of a company or of the composition of the
corresponding governing body in case of any other enterprise so as to obtain economic benefits from its
activities.
As per Notified rule on chapter I to the Companies Act 2013 total share capital means: Equity share
capital + Convertible Preference share capital
4. Subsidiary:
A subsidiary is an enterprise that is controlled by another enterprise (known as the parent).
5. Parent:
A parent is an enterprise that has one or more subsidiaries.
6. Group:
A group is a parent and all its subsidiaries.

7. Consolidated Financial Statements:

Consolidated financial statements are the financial statements of a group presented as those of a single
enterprise.
8. Equity:
Equity is the residual interest in the assets of an enterprise after deducting all its liabilities.
9. Minority Interest:
Minority interest is that part of the net results of operations and of the net assets of a subsidiary attributable to
interests which are not owned, directly or indirectly through subsidiary (ies), by the parent.
10. Effective Date:
Preparation of CFS is mandatory for all the Holding Companies from 1.4.14.
11. CFS Include:
Consolidated financial statements normally include:
 consolidated balance sheet
 consolidated statement of profit and loss
 notes and
 Other statements and explanatory material that form an integral part thereof.
Consolidated cash flow statement is presented in case a parent presents its own cash flow statement.
The consolidated financial statements are presented, to the extent possible, in the same format as that
adopted by the parent for its separate financial statements.

12. Consolidation Procedures

In preparing consolidated financial statements, the financial statements of the parent and its subsidiaries
should be combined on a line by line basis by adding together like items of assets, liabilities, income and
expenses.
In order that the consolidated financial statements present financial information about the group as that of a
single enterprise, the following steps should be taken:

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(a) The cost to the parent of its investment in each subsidiary and the parent’s portion of equity of each
subsidiary, at the date on which investment in each subsidiary is made, should be eliminated;
(b) any excess of the cost to the parent of its investment in a subsidiary over the parent’s portion of equity of
the subsidiary, at the date on which investment in the subsidiary is made, should be described as goodwill to
be recognised as an asset in the consolidated financial statements;
(c) when the cost to the parent of its investment in a subsidiary is less than the parent’s portion of equity of
the subsidiary, at the date on which investment in the subsidiary is made, the difference should be treated as
a capital reserve in the consolidated financial statements;
(d) minority interests in the net income of consolidated subsidiaries for the reporting period should be
identified and adjusted against the income of the group in order to arrive at the net income attributable to the
owners of the parent; and
(e) Minority interests in the net assets of consolidated subsidiaries should be identified and presented in the
consolidated balance sheet separately from liabilities and the equity of the parent’s shareholders.

Minority interests in the net assets consist of:

(i) The amount of equity attributable to minorities at the date on which investment in a subsidiary is made; and
(ii) The minorities’ share of movements in equity since the date the parent-subsidiary relationship came in
existence.
Where the carrying amount of the investment in the subsidiary is different from its cost, the carrying amount is
considered for the purpose of above computations.

13. Intra-group balances

Like intra-group debtors, creditors, Bills Receivable , Bills Payable, Loans etc., and intra-group transactions
and resulting unrealised profits should be eliminated in full.

14. Unrealised Profits/losses

Resulting from intra-group transactions should also be eliminated unless cost cannot be recovered.

Case Study - Upstream transaction

Subsy – S ltd. sells

Holding Limited-
Profits made by S ltd
H

Shared by Holding and

Minorities

Unrealized Profit Some goods remained

unsold

Eliminate Minorities share from MI Eliminate from Cons. Stock

Eliminate H's share from Cons. P&L

Case Study - Down-stream transaction

Holding - H ltd. Subsy - S

sells Whole Profits earned by Holding
Limited

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Consolidated Accounts as per AS 21

Unrealized Profit Some goods remained

unsold

Eliminate 100% from Consolidated Eliminate from Cons. Stock

P&L

15. Reporting Dates Are Different

The financial statements of the parent and its subsidiaries used in the preparation of the consolidated
financial statements are usually drawn up to the same date. When the reporting dates are different, the
subsidiary often prepares, for consolidation purposes, statements as at the same date as that of the parent.
When it is impracticable to do this, financial statements drawn up to different reporting dates may be used
provided the difference in reporting dates is not more than six months. The consistency principle requires that
the length of the reporting periods and any difference in the reporting dates should be the same from period
to period.

16. Uniform Accounting Policies

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 accounting policies
have been applied.

Basics:

1. Balance Sheet of H and its Subsidiary S limited as at 31.3.24 is given. Prepare a consolidated balance
sheet
Balance sheets
As on 31 .03. 2024
I. Equity & Liabilities H Limited
Equity Share Capital 10,00,000 5,00,000
General Reserve 1,00,000 3,00,000
P/L 5,00,000 4,00,000
Liabilities 5,00,000 7,00,000
21,00,000 19,00,000
II. Assets
PPE 10,00,000 10,00,000
Investments: in 3,000 shares of S limited 7,00,000 -
Current Assets 4,00,000 9,00,000
21,00,000 19,00,000

H Ld. Acquired its shares in S Ltd. on 1.07.2023 .Balance in reserves of S Ltd. stood at Rs.1,50,000 and its
profit and loss account (Cr.) was Rs.3,00,000 on 1.4.2023.

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2. Abnormal losses
Balance Sheet of H and its Subsidiary S limited as at 31.3.24 is given. Prepare a consolidated balance sheet
Balance sheets
As on 31 .03. 2024
I. Equity & Liabilities H Limited
Equity Share Capital 10,00,000 5,00,000
General Reserve 1,00,000 3,00,000
P/L 5,00,000 4,00,000
Liabilities 5,00,000 7,00,000
21,00,000 19,00,000
II. Assets
PPE 10,00,000 10,00,000
Investments: in 3,000 shares of S limited 7,00,000 -
Current Assets 4,00,000 9,00,000
21,00,000 19,00,000

H Ld. Acquired its shares in S Ltd. on 1.07.2023 .Balance in reserves of S Ltd. stood at Rs.1,50,000 and its
profit and loss account (Cr.) was Rs.3,00,000 on 1.4.2023.
During the year , in the month of June, an abnormal loss worth 25,000 took place and Insurance claim
admitted was Rs. 5,000

3. Bonus issue / Unrealised Profits

Balance Sheet of H and its Subsidiary S limited as at 31.3.24 is given. Prepare a consolidated balance sheet
Balance sheets
As on 31 .03. 2024
I. Equity & Liabilities H Limited
Equity Share Capital 10,00,000 5,00,000
General Reserve 1,00,000 4,00,000
P/L 5,00,000 4,00,000
Liabilities 5,00,000 6,00,000
21,00,000 19,00,000
II. Assets
PPE 10,00,000 10,00,000
Investments: in 3,000 shares of S limited 7,00,000 -
Current Assets 4,00,000 9,00,000
21,00,000 19,00,000

H Ld. Acquired its shares in S Ltd. on 1.07.2023 .Balance in reserves of S Ltd. stood at Rs.1,50,000 and its
profit and loss account (Cr.) was Rs.3,00,000 on 1.4.2023.
During the year , in the month of August, an abnormal loss worth 25,000 took place and Insurance claim
admitted was Rs. 5,000
During the year S limited made a Bonus issue in the ratio of 1 for 5 shares out of General reserves.

During the year, H Limited sold inventories to S limited for Rs. 5,00,000 at a profit Margin of 25% on
cost. Out of these, Rs. 2,00,000 worth of inventories are still in stock of S limited

4. Revaluation / AL/ Bonus issue/ URP/ Inter Co. transactions

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Consolidated Accounts as per AS 21

Balance Sheet of H and its Subsidiary S limited as at 31.3.24 is given. Prepare a consolidated balance sheet
Balance sheets
As on 31 .03. 2024
I. Equity & Liabilities H Limited
Equity Share Capital 10,00,000 5,00,000
General Reserve 1,00,000 3,00,000
P/L 5,00,000 4,00,000
Liabilities 5,00,000 7,00,000
21,00,000 19,00,000
II. Assets
Land 5,00,000 6,40,000
Plant and machinery 5,00,000 3,60,000
Investments: in 3,000 shares of S limited 7,00,000 -
Current Assets 4,00,000 9,00,000
21,00,000 19,00,000

H Ld. Acquired its shares in S Ltd. on 1.07.2023 .

Balance in reserves of S Ltd. stood at Rs.1,50,000 and its profit and loss account (Cr.) was Rs.3,00,000 on
1.4.2023.
.
On the Date of acquisition , P/M of S limited was revalued by H limited at Rs. 1,00,000 more than its book
value. Book value, on 1.4.2023, was Rs. 400,000.

During the year , in the month of August, an abnormal loss worth 25,000 took place and Insurance claim
admitted was Rs. 5,000
During the year S limited made a Bonus issue in the ratio of 1 for 5 shares out of General reserves.

During the year, H Limited sold inventories to S limited for Rs. 5,00,000 at a profit Margin of 25% on cost. Out
of these, Rs. 2,00,000 worth of inventories are still in stock of S limited

Debtors of H limited include Rs. 1,00,000 due from S limited

Bills Receivable of S limited include Rs. 50,000 due from H limited.

5. - Dividend
Balance Sheet of H and its Subsidiary S limited as at 31.3.24 is given. Prepare a consolidated balance sheet
Balance sheets
As on 31 .03. 2024
I. Equity & Liabilities H Limited
Equity Share Capital 10,00,000 5,00,000
General Reserve 1,00,000 3,00,000
P/L 5,00,000 4,00,000
Liabilities 5,00,000 7,00,000
21,00,000 19,00,000
II. Assets
Land 10,00,000 5,00,000
Plant and machinery 5,00,000 3,60,000
Investments: in 3,000 shares of S limited 7,00,000 -
Current Assets 4,00,000 9,00,000

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21,00,000 19,00,000

H Ld. Acquired its shares in S Ltd. on 1.07.2023 .

Balance in reserves of S Ltd. stood at Rs.1,50,000 and its profit and loss account (Cr.) was Rs.3,00,000 on
1.4.2023.
During the year , on 31.12.2023 H Limited declared and paid dividend @ 20% for the year ended 31.03.23

Questions from Recent Examinations

Dec. 22
Given below arc the extracts from the Balance Sheets of H Ltd. and S Ltd. as at 31st March, 2022!
Particulars H Ltd. S Ltd.

Equity Share Capital (Shares of Rs. 10 each fully paid—up) 10,00,000 5,00,000

General Reserve 6,00,000 8,40,500

Profit& Loss A/c 2,60,000 80.500

Loan from S Ltd. (including Interest) 12,60,000 -

Trade Payables 7,30,000 10,00,000

Land & Building 6,00,000 2,70,000

Plant & Machinery 5,00,000 3,70,000

Furniture & Fixtures 4,00,000 2,70,000

Equity Shares in S Ltd. 4,60,000 -

I 5'% Loan to H Ltd.(Given on 01.06.2021) - 11,20,000

inventories 2,50,000 70,000

Trade Receivables 6,00,000 3,00,000

Cash & Bank 10,40,000 21,000

Additional Information: (Assume that the profits are evenly earned throughout the year and i gnore
taxes)
I. On 01.01.2021, H Lid. acquired 25,000 Equity Shares of S Ltd. when the credit balance of
Profit & Loss Account of S Ltd. was Rs. 1,87,000 and that of General Reserve on that date was
Rs. 7,80,500. H Ltd. further acquired some equity shares in S Ltd. on 01.07.2021.
II. On 31,08,2021, S Ltd. declared and paid dividend @ 20% on equity shares for the year 2020
2021. On 01.10.2021 S Ltd. declared and paid an Interim dividend @ 20% p.a. on equity
shares out of current year's profits for the half year ended 30.09.2021. S Ltd. issued 2 shares
for every 5 shares held, as bonus Shares but no accounting effect has yet been given for bonus
shares.
III. The Land and Building of S Ltd. which stood at Rs. 3,00,000 on 01.04,2021, was considered as
worth of Rs. 7,05,000 on 01.06.2021, for which necessary adjustments are yet to be made. The
Furniture & Fixtures of S Ltd. which stood at Rs. 3,00,000 on 01.04.2021, was considered as

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Consolidated Accounts as per AS 21

worth of Rs. 1,05,000 on 01.06.21 , for which necessary adjustments are yet to be made.
IV. H Ltd. and S Ltd. agreed that with effect from 1st July, 2021, for services rendered, H Ltd.
should charge Rs.10,000 p.m. but no accounting effect has yet been given. During June 2021,
goods closing Rs. 23,500 were destroyed against which the insurer paid only Rs. 2,000 to S
Ltd.
V. S Ltd. owed H Ltd. Rs. 3,00,000 for the purchase of stock from H Lid. which made at a profit of
20% on cost . S Ltd. sold some of these goods for Rs. 2,88,000 at a profit of 20% on its cost till
31.03.2022. On 01.01.2022, S Ltd. sold to H Ltd. a Machine for Rs. 2,40,000 at a loss of 25%
on cost. depreciation at 10% p.a. was provided by H Ltd. on this Machine.
VI. H Ltd. held 42,000 equity shares in S Ltd. on 31.03.2022.
Required: Calculate the Minority Interest, Capital Reserve Cost of Control and the Balance of
Consolidated P&L Account to be taken to the Consolidated Balance Sheet of H Ltd. And its Subsidiary,
as at 31st March, 2022.

June 23 Old Syllabus

Given below arc the extracts from the Balance Sheets of H Ltd. and S Ltd. as at 31st March, 2023
Particulars H Ltd. S Ltd.

Equity Share Capital (Shares of Rs. 10 each fully paid —up) 2,40,000 2,40,000

Capital Reserve since 1.4.2020 - 5,000

General Reserve 40,000 32,000

Profit& Loss A/c 24,000 39,000

Trade Creditors 8,000 15,000

BP 4,000 10,000

Tangible Fixed Asset 88,000 1,74,960

Goodwill ( Purchased) - 5,000

Investments 1,80,000 10,000

Trade Debtors 12,000 30,000

BR 8,000 32,000

Inventories 20,000 80,000

Cash & Bank 8,000 9,040

Contingent Liability of H Limited: BR discounted not yet matured at Rs. 5,000
Additional Information: (Assume that the profits are evenly earned throughout the year and ignore
taxes)
I. On 01.04.2020, H Ltd. acquired from the shareholders of S Limited 10,000 Shares of Rs. 10
each in and allotted consideration of Rs. 8,000 of its own shares of Rs. 10 each at a premium
of Rs. 6 per share. On 1st Oct. 2020 H limited acquired further shares in S Limited for Rs.
48,000 @ Rs. 8.

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II. Balances in GR of S Limited stood on 1.4.20 at Rs. 60,000. Out of current profits an uniform
amount has been transferred to GR every Year. The Net Profit made during three Years is Rs.
55,200 including Rs. 6,000 received from Insurance company in settleme nt of claim towards
loss of stock by fire on 30.06.2020 (cost Rs. 10,800 included in opening stock)
III. On 30th Septt. Dividends have been paid @ 10% for 2019-2020, 2020-2021 and 2021-2022 in
the years 2020-21, 2021-22 and 2022-23 respectively, H Ltd. Credited all dividends received to
PL a/c On 01.03.2023 S Ltd. issued 1 shares for every 5 shares held, as bonus Shares out of
reserves created prior to 01.04.20.
IV. On 1.10.2020, Fixed Assets and Investments of S limited , were undervalued by 5% and
overvalued by 100% Respectively but no adjustment had been made in the books. Depreciation
on Fixed Assets had been charged @10% p.a. ( on WDV basis) , There being no addition or
sale since 01.04.2020.
V. H limited incurred an expenditure of Rs. 500 per month on behalf of S limited and this was
debited to the PL a/c of H limited but nothing has been done in the books of S limited.
VI. Trade Creditors of H limited include Rs. 4,000 due to S limited. Trade Debtors of S limited
include Rs. 8,000 for sales to H limited invoiced at cost less 20%. 80% of these goods are still
unsold. It is found that H limited has remitted a cheque of Rs. 4,000, which has not yet been
received by S limited
VII. BR of H limited include Rs. 4,000 Bills accepted by S limited. Bills discounted by h limited but
not yet matured include Rs. 3,000 accepted by S limited.
Required: Calculate the Minority Interest, Cost of Capital and the balance on Consolidated P&L
Account to be taken to the Consolidated Balance Sheet of H Ltd. And its Subsidiary, as at 31st March,
2023.

s & Rights Issue

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