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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Ganga Pharma Ltd, which has a subsidiary and an associate, is preparing its financial statements for the year ended 31 March. The Managing Director says that only standalone financial statements are required because the subsidiary files its own accounts. Which statement reflects the correct position under the Companies Act, 2013?

A company having subsidiaries, associates or joint ventures must, in addition to standalone statements, prepare consolidated financial statements in the same form and manner as its own and lay both before the annual general meeting. The subsidiary filing its own accounts does not remove this duty.

  1. AThe company must prepare consolidated financial statements of itself and its subsidiaries and associates in the same form and manner as its own, and lay them before the annual general meeting along with its standalone statementsCorrect
  2. BConsolidated statements are required only if the subsidiary is a wholly owned subsidiary
  3. CConsolidated statements are optional and need approval of members by special resolution
  4. DConsolidated statements need be prepared only for the subsidiary and not for the associate

Explanation

Where a company has one or more subsidiaries or associates (or joint ventures), it must prepare consolidated financial statements in addition to its own, in the same form and manner, and lay them before the AGM. Exemptions are limited and narrowly defined, not based on the subsidiary filing its own accounts. Option 4 omits associates, which the Act includes.

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