Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Consolidated and Separate Financial Statements (Ind AS 110, 27, 28, 111, 112) for CA Final

Updated 5 October 2026 · Fact-checked

Consolidation under Ind AS 110 combines the financial statements of a parent and its subsidiaries line by line, as one economic entity. To solve a question, find control, fix the acquisition-date goodwill, eliminate intra-group items, then compute non-controlling interest and consolidated reserves. Associates and joint ventures use the equity method under Ind AS 28.

Understand Consolidated and Separate Financial Statements

A parent and its subsidiaries are separate legal entities but one economic unit. Ind AS 110 asks you to present them together. The test is control, not the percentage held. An investor controls an investee when it has power over it, exposure or rights to variable returns, and the ability to use that power to affect those returns. Holding more than half the votes usually gives control, but potential voting rights, contractual rights and de facto control can also matter.

In consolidation, you add assets, liabilities, income and expenses of parent and subsidiary line by line. Then you remove the parent's investment against the parent's share of the subsidiary's equity at the acquisition date. The difference is goodwill or a bargain purchase gain, measured under Ind AS 103. The share of equity not owned by the parent is shown as non-controlling interest (NCI), separately within equity. NCI can be measured at fair value or at its proportionate share of net identifiable assets, where Ind AS 103 allows the choice.

Intra-group balances and transactions are eliminated in full. This includes sales, loans, interest, dividends and unrealised profit in closing inventory or transferred assets. Uniform accounting policies and, as far as practicable, the same reporting date are required. Ind AS 110 also says that changes in ownership without loss of control are equity transactions. No goodwill or profit or loss arises. If control is lost, you derecognise the subsidiary's assets, liabilities and NCI, recognise any retained interest at fair value, and record the gain or loss in profit or loss.

An associate is an entity over which you have significant influence, presumed at 20% or more of voting power unless shown otherwise. Ind AS 28 requires the equity method. You show one line in the balance sheet, the investment, which starts at cost and moves with your share of the investee's profit or loss, OCI and dividends. It is not line-by-line consolidation. Unrealised profits on transactions between investor and associate are eliminated to the extent of your interest.

In Ind AS 111, a joint arrangement has joint control by two or more parties. If the parties have rights to the assets and obligations for the liabilities, it is a joint operation, and each party recognises its share of assets, liabilities, revenue and expenses. If the parties have rights to the net assets, it is a joint venture, accounted for by the equity method. The classification depends on structure, legal form, contract terms and other facts. Ind AS 112 requires disclosure of the judgements, interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. Ind AS 27 covers separate financial statements, where investments are carried at cost, under Ind AS 109, or by the equity method.

Key rules to remember

Goodwill (full or partial): Goodwill = Consideration transferred + NCI (at fair value or proportionate share) + Fair value of previously held interest − Net identifiable assets at acquisition date (fair value); A negative result is a bargain purchase gain, recognised in OCI and accumulated in equity as capital reserve, subject to Ind AS 103 conditions.
Non-controlling interest at reporting date: NCI = NCI at acquisition + NCI% × post-acquisition change in subsidiary's equity (adjusted for fair value adjustments and unrealised profit where applicable); Under the full goodwill method, NCI also carries its share of goodwill, less any impairment attributed to it.
Consolidated reserves: Group reserves = Parent's reserves + Parent % × post-acquisition reserves of subsidiary − Goodwill impairment attributable to parent − Parent's share of unrealised profit adjustments; Post-acquisition reserves exclude pre-acquisition reserves, which are absorbed in goodwill.
Unrealised profit in inventory: Unrealised profit = Closing inventory from intra-group purchase × Profit margin on sales; If margin is on cost, convert: profit = cost-plus % ÷ (100 + %) × transfer price. Downstream: adjust the parent. Upstream: adjust the subsidiary and share with NCI.
Equity method carrying amount: Closing investment = Cost + Share of post-acquisition profit + Share of OCI − Dividends received − Impairment − Share of unrealised profit eliminated; Dividends reduce the investment. They are not income in consolidated statements.
Change in ownership without loss of control: Adjustment to equity = Consideration paid or received − Change in carrying amount of NCI; The difference goes to equity attributable to owners of the parent. No gain or loss in profit or loss and no change to goodwill.
Gain or loss on loss of control: Gain or loss = Fair value of consideration received + Fair value of retained interest + Carrying amount of NCI − Carrying amount of subsidiary's net assets (including goodwill); Amounts earlier in OCI relating to the subsidiary are reclassified or transferred as other Ind AS require.
Joint arrangement classification: Rights to assets and obligations for liabilities → Joint operation. Rights to net assets → Joint venture.; Joint operator accounts for its own share line by line. Joint venturer uses the equity method.

How to solve Consolidated and Separate Financial Statements questions

Use the same sequence for any consolidation or equity method question. Writing it in this order also helps the examiner give you step marks.

1Decide the relationship: subsidiary (control), associate (significant influence), joint operation or joint venture. State the test you applied from the facts.
2Fix the acquisition date and prepare a working for the subsidiary's net assets at that date, including fair value adjustments and related deferred tax where asked.
3Compute goodwill or bargain purchase gain using the NCI measurement basis given in the question.
4Remove intra-group items: inter-company balances, sales and purchases, dividends, interest, and unrealised profit in inventory or assets. Decide whether each is upstream or downstream.
5Work out the subsidiary's post-acquisition profit, adjust for extra depreciation on fair value uplift and unrealised profit, then split it between parent and NCI.
6Prepare NCI and consolidated reserves workings, then build the consolidated balance sheet or profit and loss line by line.
7For associates and joint ventures, roll forward the investment under the equity method. For joint operations, add your share of each line.
8For changes in ownership, decide first whether control is retained, gained or lost. Then apply the equity entry, step acquisition rule or loss of control gain.

Quickest way: Five-working shortcut for consolidation

When to use it: Use this when time is short and the question asks for a consolidated balance sheet or specific figures such as goodwill, NCI or reserves.

Draw the group structure with percentages and dates first. This shows the control status immediately.
Prepare one table: subsidiary's equity at acquisition and at reporting date. The difference is post-acquisition profit.
Compute goodwill from that table. Adjust the post-acquisition figure for fair value depreciation and unrealised profit.
Compute NCI and group reserves directly from the adjusted post-acquisition figure. Keep the balancing test in mind: assets minus liabilities must equal share capital plus reserves plus NCI.
Add line items for the balance sheet last. Do not cross-cast every line before the workings are done.

Common mistakes in Consolidated and Separate Financial Statements

Using the pre-acquisition reserves in group reserves.
Students copy the subsidiary's closing reserves instead of separating the acquisition-date balance.
Fix: Always compute post-acquisition reserves as closing reserves minus acquisition-date reserves. Pre-acquisition reserves go into the goodwill calculation.
Charging all unrealised profit to the parent's share.
Upstream and downstream transactions are not separated.
Fix: For downstream sales, eliminate the profit fully against the parent. For upstream sales, reduce the subsidiary's profit and share the adjustment with NCI.
Treating a share bought from or sold to NCI as a gain or loss.
Students apply loss-of-control logic to every change in holding.
Fix: If control stays, treat it as an equity transaction. Adjust NCI and owners' equity only. Do not touch goodwill or profit or loss.
Consolidating an associate line by line.
Confusing the equity method with Ind AS 110 consolidation.
Fix: Show one line for the investment. Adjust it for share of profit, OCI, dividends and eliminations, and show the share of profit in one line in profit or loss.
Classifying a joint arrangement by percentage held or by legal form alone.
Students look for a company structure and conclude it is a joint venture.
Fix: Check the legal form, contract terms and other facts and circumstances. Decide whether rights are to assets and liabilities or to net assets.
Forgetting extra depreciation on fair value uplift.
The uplift is used for goodwill and then ignored afterwards.
Fix: Add a separate line in the post-acquisition working for depreciation on the uplift. Reduce the subsidiary's profit by it, and share it with NCI.

Worked examples

Example 1

P Ltd acquired 80% of S Ltd on 1 April 2025 for ₹9,00,000. On that date S Ltd had share capital of ₹5,00,000 and reserves of ₹3,00,000. Fair values equal book values. NCI is measured at its proportionate share of net identifiable assets. At 31 March 2026, S Ltd's reserves are ₹4,50,000. P Ltd's own reserves are ₹12,00,000 (excluding any income from S Ltd). Compute goodwill, NCI and consolidated reserves at 31 March 2026. Ignore impairment.

Show the solution

Net assets of S Ltd at acquisition = ₹5,00,000 + ₹3,00,000 = ₹8,00,000.
NCI at acquisition = 20% × ₹8,00,000 = ₹1,60,000.
Goodwill = ₹9,00,000 + ₹1,60,000 − ₹8,00,000 = ₹2,60,000.
Post-acquisition reserves of S Ltd = ₹4,50,000 − ₹3,00,000 = ₹1,50,000.
NCI at 31 March 2026 = ₹1,60,000 + 20% × ₹1,50,000 = ₹1,60,000 + ₹30,000 = ₹1,90,000.
Group share of post-acquisition reserves = 80% × ₹1,50,000 = ₹1,20,000.
Consolidated reserves = ₹12,00,000 + ₹1,20,000 = ₹13,20,000.

Answer: Goodwill ₹2,60,000; NCI ₹1,90,000; consolidated reserves ₹13,20,000.

Example 2

A Ltd owns 30% of B Ltd, an associate, bought on 1 April 2025 for ₹6,00,000. For the year ended 31 March 2026, B Ltd reported profit of ₹4,00,000 and paid dividends of ₹1,00,000. During the year, A Ltd sold goods costing ₹80,000 to B Ltd for ₹1,00,000. B Ltd still holds all of these goods at year end. Compute the carrying amount of the investment in B Ltd at 31 March 2026 under the equity method. Ignore tax and impairment.

Show the solution

Share of B Ltd's profit = 30% × ₹4,00,000 = ₹1,20,000.
Dividend received = 30% × ₹1,00,000 = ₹30,000, which reduces the investment.
Profit on the sale by A Ltd to B Ltd = ₹1,00,000 − ₹80,000 = ₹20,000. This is a downstream transaction and all the goods are unsold.
Unrealised profit to eliminate = 30% × ₹20,000 = ₹6,000. This reduces the share of profit and the investment.
Closing investment = ₹6,00,000 + ₹1,20,000 − ₹30,000 − ₹6,000 = ₹6,84,000.
Share of profit recognised in profit or loss = ₹1,20,000 − ₹6,000 = ₹1,14,000.

Answer: The investment in B Ltd is carried at ₹6,84,000, and A Ltd recognises ₹1,14,000 as share of profit of the associate.

Exam tips

In case-scenario MCQs, read the facts for control indicators first: voting rights, board control, contractual rights, and rights to returns. Do not decide by the percentage alone.
In written answers, show goodwill, NCI and reserves as separate workings. Examiners award marks for each working even if a later number is wrong.
Always state the classification (subsidiary, associate, joint operation, joint venture) and the reason in one sentence before the numbers.
For changes in ownership, write which of the three cases applies: control retained, control gained in stages, or control lost. Then apply the matching rule.
In Paper 6, link the consolidation outcome to the case: for example, how an impairment, a loss of control, or a related party transaction changes the group figures.

Practice questions from Financial Reporting

Consolidated and Separate Financial Statements in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Consolidated and Separate Financial Statements: frequently asked questions

What is the difference between a joint operation and a joint venture under Ind AS 111?

In a joint operation, the parties have rights to the assets and obligations for the liabilities of the arrangement. Each party recognises its share of assets, liabilities, revenue and expenses. In a joint venture, the parties have rights to the net assets and use the equity method.

Is 20% holding always an associate under Ind AS 28?

No. Holding 20% or more of voting power presumes significant influence, but you can rebut it with evidence. Holding less than 20% can still be an associate if other facts show significant influence. Always check the facts given.

How do I treat a purchase of more shares in a subsidiary?

If the parent already controls the entity, buying more shares is an equity transaction. You adjust NCI and the owners' equity for the difference. You do not remeasure goodwill or recognise a gain or loss.

What happens to the retained stake when control is lost?

The retained interest is measured at fair value on the date control is lost. That fair value is used as the cost on initial recognition of an associate, joint venture or financial asset. The gain or loss on loss of control goes to profit or loss.