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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Kaveri Pharma Ltd has a wholly owned subsidiary in Bengaluru and also an associate company. The Board is preparing financial statements for the year. Under the Companies Act, 2013, what is the correct position regarding consolidation?

A company having subsidiaries must prepare consolidated financial statements including its subsidiaries, associates and joint ventures, in addition to standalone statements, in the same form and manner as its own statements, and lay them before the annual general meeting. It is not limited to listed companies.

  1. AConsolidated financial statements are needed only for subsidiaries, and associates are ignored
  2. BOnly a listed company must prepare consolidated statements
  3. CThe company must prepare consolidated financial statements covering its subsidiaries, associates and joint ventures, in addition to its standalone statements, in the same manner as the standalone statements are laid before the AGMCorrect
  4. DConsolidation is optional for all companies if the subsidiary is wholly owned

Explanation

Where a company has one or more subsidiaries, it must, in addition to its own standalone statements, prepare a consolidated financial statement of the company and of all subsidiaries, associates and joint ventures in the same form and manner as its own, laid before the AGM. Option A omits associates and joint ventures. Option B wrongly limits it to listed companies. Option D is wrong because there is no blanket optional status for wholly owned subsidiaries; only specified exemptions in the Rules apply.

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