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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Kaveri Industries Ltd has a wholly owned subsidiary in Pune and an associate company in Chennai. The company's board asks whether it must prepare consolidated financial statements. Under the Companies Act, 2013, what is the correct position?

A company that has one or more subsidiaries, associates or joint ventures must prepare consolidated financial statements covering all of them in addition to its own standalone statements, subject to prescribed exemptions. The duty does not depend on listing or on a turnover threshold, and it is not limited to subsidiaries.

  1. AConsolidation is required only of subsidiaries, and associates and joint ventures are ignored
  2. BConsolidation is required only if the subsidiary is listed
  3. CConsolidated financial statements are required only if the company's turnover exceeds Rs 500 crore
  4. DA company having one or more subsidiaries, associates or joint ventures must, in addition to its own financial statements, prepare a consolidated financial statement of the company and of all of them, subject to the prescribed exemptionsCorrect

Explanation

Section 129(3) requires a company with subsidiaries, associates or joint ventures to prepare consolidated statements in addition to standalone statements and to attach them. Associates and joint ventures are included, so the option limiting it to subsidiaries is wrong. There is no turnover or listing threshold that creates the requirement itself.

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