Skip to content

CA Intermediate · Corporate and Other Laws · Accounts of Companies

Orion Components Ltd has a subsidiary, Sagar Moulds Pvt Ltd, and an associate company, Tarang Dies Ltd. The company's board is preparing the financial statements for the year. A new director states four views. Which view correctly reflects the requirement of the Companies Act, 2013 regarding consolidation?

A company with subsidiaries, associates or joint ventures must prepare consolidated financial statements in addition to its standalone statements, in the same form and manner, and lay both before the annual general meeting. Consolidation is mandatory, covers associates and joint ventures too, and does not replace standalone accounts.

  1. AConsolidated financial statements are required only for subsidiaries, and never for associate companies or joint ventures
  2. BBesides its standalone statements, the holding company having subsidiaries or associates must also prepare consolidated financial statements of the company and its subsidiaries, associates and joint ventures in the same form and manner as its own, and lay them before the AGMCorrect
  3. CConsolidated statements replace the standalone statements, which need not be prepared
  4. DConsolidation is optional and is done only if the members pass a special resolution

Explanation

A company with one or more subsidiaries, associate companies or joint ventures must, in addition to its own standalone statements, prepare consolidated financial statements in the same form and manner, and lay them at the AGM. They do not replace standalone statements. The reference to consolidation covering only subsidiaries is wrong since associates and joint ventures are also included, and no special resolution is required.

Did you get it right without looking?

One question tells you little. A timed set on Accounts of Companies shows your real accuracy, how long you take and where you lose marks.

Practise Accounts of CompaniesFree diagnostic mock

More Accounts of Companies questions