Corporate Accounting and Financial Management · Consolidation of Accounts

AS 21 and Ind AS 110: Consolidation Framework Explained

Updated 11 October 2026 · Fact-checked

AS 21 and Ind AS 110 require a parent to present consolidated financial statements that show the parent and its subsidiaries as a single economic entity. You apply uniform accounting policies and a common reporting date (gap of at most three months under Ind AS 110). Limited exemptions exist, such as for certain wholly-owned subsidiaries.

Understand AS 21 and Ind AS 110: Consolidation Framework

A company that controls other companies has more than its own balance sheet. Its separate statements show only the investment in subsidiaries. They do not show the full assets, liabilities and earnings that the parent controls. Consolidated financial statements fix this.

As defined in Ind AS 110, consolidated financial statements are the financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity. Think of the group as one business, even though it has many legal entities.

The rule of who must prepare them is simple. Under Ind AS 110, an entity that is a parent shall present consolidated financial statements. Exemptions are narrow. A parent need not present them only if it meets all of these conditions: it is a wholly-owned subsidiary, or a partially-owned subsidiary whose other owners have been informed and do not object; its debt or equity is not traded in a public market; it has not filed, and is not filing, its financial statements with a securities commission or regulator to issue instruments in a public market; and its ultimate or an intermediate parent publishes public financial statements that comply with Ind AS. All four must hold. Separately, a parent that is an investment entity does not present consolidated statements if it must measure all its subsidiaries at fair value through profit or loss.

Two housekeeping rules make the numbers add up. First, uniform accounting policies: Ind AS 110 (para 19) says a parent shall use uniform policies for like transactions and events in similar circumstances. If a group member uses different policies, its statements are adjusted (para B87). Second, a common reporting date: the parent and subsidiary statements must have the same reporting date (para B92). If the dates differ, the subsidiary prepares additional information as of the parent's date, unless that is impracticable.

AS 21 is the older standard used by companies that follow Indian GAAP (Accounting Standards). It also requires uniform policies. Its approach differs when uniformity is not practicable: it does not force the adjustment but requires disclosure of that fact and of the proportions of items to which different policies were applied. Ind AS 110 is built on a control model and is aligned with IFRS 10. Under it, the paras on exemption and reporting dates above are the core you must know.

Key rules to remember

Definition of consolidated financial statements: Group statements = assets, liabilities, equity, income, expenses and cash flows of parent + subsidiaries, shown as a single economic entity; Ind AS 110, Appendix A. Use this wording to open any definition answer.
Who must consolidate: Parent → must present consolidated financial statements (Ind AS 110, para 4); Exemption only if all four conditions in para 4(a) are met.
Reporting date rule (Ind AS 110): Gap between subsidiary's date and consolidated date ≤ 3 months; period length and gap same from period to period; Para B93. Applies only where it is impracticable to use the same date. Then use the latest subsidiary statements, adjusted for significant transactions or events in the gap.
Uniform policies: Like transactions + similar circumstances → same accounting policy across group; Ind AS 110 para 19 and B87 (adjust the member's statements). AS 21 para 20: if impracticable, disclose the fact and the proportions of items affected.
Investment entity: Investment entity parent measuring all subsidiaries at FVTPL → no consolidated statements (para 4B); Applies only if para 31 requires all subsidiaries to be measured at fair value through profit or loss.

How to solve AS 21 and Ind AS 110: Consolidation Framework questions

Theory questions on this topic ask you to state, apply or compare rules. Use the same sequence each time so you do not miss a mark.

1Read the question and mark the framework asked: AS 21, Ind AS 110, or both.
2Identify the issue: who must consolidate, an exemption, uniform policies, or reporting dates.
3State the rule in one or two sentences, using the standard's wording and paragraph number where you are sure.
4Apply it to the facts: check each condition one by one and tick or cross it.
5For exemption questions, remember that all conditions must be met. One failed condition means consolidation is required.
6For date or policy questions, say what adjustment or disclosure is needed.
7Write a clear conclusion in one line: consolidate or not, adjust or disclose.

Quickest way: Four-check test for any consolidation scenario

When to use it: Use for short case-based questions where you have limited time and must decide quickly.

Is the entity a parent (does it control another entity)? If no, stop.
Does it meet all four exemption conditions of para 4(a)? One miss means it must consolidate.
Are policies uniform? If not, adjust (Ind AS 110) or disclose (AS 21 if impracticable).
Is the reporting date the same? If not, use additional information, or at most a three-month gap with adjustments (Ind AS 110).

Common mistakes in AS 21 and Ind AS 110: Consolidation Framework

Saying any wholly-owned subsidiary is exempt from consolidation.
Students remember only the first condition of para 4(a).
Fix: List all four conditions: ownership or no objection, not publicly traded, not filing for public issue, and a parent producing public Ind AS financial statements. All must be met.
Stating the three-month limit as the normal rule.
The number is easy to remember, so the context is dropped.
Fix: The normal rule is the same reporting date. The three-month gap is allowed only where it is impracticable to use the same date, with adjustment for significant events.
Ignoring the gap adjustment when dates differ.
Students focus on the limit and forget what you do inside it.
Fix: Say the latest subsidiary statements are used, adjusted for significant transactions or events between the two dates.
Confusing the AS 21 and Ind AS 110 treatment of non-uniform policies.
Both standards mention uniform policies, so they look identical.
Fix: Ind AS 110 requires adjustment of the member's statements. AS 21 allows disclosure of the fact and the proportions of items affected if uniformity is not practicable.
Writing that consolidated statements show only the parent's own assets plus investments.
Mixing up separate and consolidated statements.
Fix: Say the group is presented as a single economic entity, with assets, liabilities, equity, income, expenses and cash flows combined.

Worked examples

Example 1

Explain with reasons whether Alpha Ltd, a wholly-owned subsidiary of Beta Ltd, must present consolidated financial statements under Ind AS 110. Alpha's shares are not traded. Alpha has not filed and is not filing financial statements to issue instruments publicly. Beta publishes public financial statements that comply with Ind AS and consolidate its subsidiaries.

Show the solution

Rule: Ind AS 110 para 4 says a parent shall present consolidated financial statements, unless para 4(a) applies.
Check condition (i): Alpha is wholly-owned, so it meets the ownership condition.
Check condition (ii): its debt and equity are not traded in a public market. Met.
Check condition (iii): it has not filed, nor is filing, for a public issue. Met.
Check condition (iv): its ultimate parent, Beta, produces public Ind AS statements in which subsidiaries are consolidated. Met.

Answer: All four conditions of para 4(a) are met, so Alpha Ltd need not present consolidated financial statements, provided it is a parent with its own subsidiaries.

Example 2

Gamma Ltd has a reporting date of 31 March. Its subsidiary Delta Ltd has a reporting date of 31 December and cannot practicably prepare statements as at 31 March. Can Gamma consolidate Delta, and how?

Show the solution

Rule: Under para B92, statements must have the same reporting date. If dates differ, the subsidiary prepares additional information as of the parent's date, unless impracticable.
Here it is impracticable, so para B93 allows use of the most recent financial statements of the subsidiary.
Adjust those statements for the effects of significant transactions or events between 31 December and 31 March.
Check the gap: 31 December to 31 March is three months, which is within the maximum of three months.
The length of reporting periods and the gap must be the same from period to period.

Answer: Yes. Gamma can consolidate Delta using Delta's 31 December statements, adjusted for significant transactions or events up to 31 March. The three-month gap is the maximum allowed and must stay consistent each period.

Exam tips

Learn the four exemption conditions of para 4(a) as a list. Examiners often ask you to state them or test one failing condition.
In compare-and-contrast questions, present points side by side in two columns of your answer: policy treatment, reporting date, exemption and control basis.
Always add a one-line conclusion to scenario answers, such as consolidation is required or exempt.
Quote the definition of consolidated financial statements exactly. It earns easy marks.
Write the paper's Act link carefully: consolidated statements are a Companies Act, 2013 requirement for companies with subsidiaries, but cite a section number only if you are sure of it.

Practice questions from Consolidation of Accounts

AS 21 and Ind AS 110: Consolidation Framework in other exams

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

AS 21 and Ind AS 110: Consolidation Framework: frequently asked questions

What is the difference between AS 21 and Ind AS 110?

AS 21 is the Accounting Standard followed by companies not on Ind AS. Ind AS 110 applies to companies required to follow Ind AS and is aligned with IFRS 10. On policies, AS 21 allows disclosure if uniform policies are impracticable, while Ind AS 110 requires adjustment to conform to group policies.

When can a parent skip consolidated financial statements under Ind AS 110?

Only if all four conditions of para 4(a) are met. These cover ownership or no objection from other owners, no public trading, no filing for a public issue, and a higher parent that publishes public Ind AS statements. An investment entity parent measuring all subsidiaries at fair value through profit or loss is also not required to consolidate.

What is the maximum gap between reporting dates under Ind AS 110?

The gap between the subsidiary's statements and the consolidated statements must be no more than three months. This is allowed only when using the same date is impracticable. You must adjust for significant transactions or events in the gap.

Do all group companies have to use the same accounting policies?

For like transactions and events in similar circumstances, yes. Under Ind AS 110, a group member's statements are adjusted to match the group's policies. Under AS 21, if this is not practicable, you disclose that fact and the proportions of items where different policies were used.