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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Kaveri Auto Components Limited has a wholly owned subsidiary and an associate company. The board is preparing the financial statements for the year. Under the Companies Act, 2013, which statement correctly describes its obligation regarding consolidated financial statements?

A company with subsidiaries must prepare consolidated financial statements in addition to its standalone statements. They cover the company, its subsidiaries, and also associates and joint ventures, are in the same form as standalone statements, and are laid before the annual general meeting. Listing of the subsidiary is not a condition.

  1. AConsolidation is required only if the subsidiary is listed on a stock exchange
  2. BThe company must prepare consolidated financial statements of the company and all its subsidiaries, including the associate and joint venture, in the same form and manner as its own standalone statements, and lay them before the annual general meetingCorrect
  3. COnly standalone statements are required; consolidated statements are optional for companies in India
  4. DConsolidated statements are needed only for the subsidiary, and associates must always be excluded

Explanation

Where a company has one or more subsidiaries, it must prepare a consolidated financial statement in the same form and manner as its standalone statements, also covering associate companies and joint ventures. It is laid before the AGM along with the standalone statements. Making it depend on listing, or treating it as optional, contradicts the Act.

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