SUBSIDIARIES AND CONSOLIDATION OF ACCOUNTS

Where a company has any subsidiary, the company shall prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own.  The consolidated financial statement shall also be laid before the annual general meeting along with own financial statement.

The company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiaries.

Under this section, the word subsidiary shall include associate company and joint venture.

Form of Statement containing salient features of financial statements of subsidiaries [Rule 5]

According to Second Proviso to Section 129(3) , where a company has any subsidiary, the company shall prepare a consolidated financial statement of the company and of all subsidiaries in the same form and manner as that of its own.  The consolidated financial statement shall also be laid before the annual general meeting along with own financial statement.

The statement containing the salient feature of the financial statement of a company’s subsidiary or subsidiaries, associate company or companies and joint venture or ventures under the first proviso to sub-section (3) of section 129 shall be in Form AOC – 1.

Manner of consolidation of accounts [Rule 6]

The consolidation of financial statements of the company shall be made in accordance with the provisions of Schedule III of the Act and the applicable accounting standards. [Rule 6]

In case of a company covered under sub-section (3) of section 129 which is not required to prepare consolidated financial statements under the Accounting Standards, it shall be sufficient if the company complies with provisions on consolidated financial statements provided in Schedule III of the Act. [First Proviso Rule 6]

With effect from 14^th October 2014, The Companies (Accounts) Amendment Rules 2014 added two proviso; second and third proviso to Rule 6.

This rule shall not apply in respect of preparation of consolidated financial statement by an intermediate wholly-owned subsidiary, other than a wholly-owned subsidiary whose immediate parent is a company incorporated outside India. [Second Proviso Rule 6]

Intermediate wholly – owned subsidiary of an Indian holding company is exempted from consolidation of accounts.

This rule shall, subject to any other law or regulation, not apply for the financial year commencing from the 1st day of April, 2014 and ending on the 31st March, 2015, in case of a company which does not have a subsidiary or subsidiaries but has one or more associate companies or joint ventures or both, for the consolidation of financial statement in respect of associate companies or joint ventures or both, as the case may be. [Third Proviso Rule 6]

For Financial year 2014 – 15, Consolidation of accounts is not required in respect of associate companies and joint venture companies.

With effect from 16 January 2015, the Companies (Accounts) Amendment Rules 2015 added forth proviso. This rule shall not apply in respect of consolidation of financial statement by a company having subsidiary or subsidiaries incorporated outside India only for the financial year commencing on or after 1st April, 2014. [Forth Proviso Rule 6]

Consolidation of accounts is not required for an Indian Companies if it has one or more subsidiary incorporated outside India. This seems such holding company is also not required to consolidate accounts in respect of its Indian subsidiary companies.