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CA Intermediate · Corporate and Other Laws · Accounts of Companies

Sagar Pharma Ltd is a listed company with a subsidiary, Sagar Labs Pvt Ltd, and an associate company. The board is preparing the annual financial statements for the year ended 31 March. Which of the following statements is correct under the Companies Act, 2013 regarding consolidation?

A company with subsidiaries, associates or joint ventures must prepare consolidated financial statements in addition to its own standalone statements. Both sets are laid before the annual general meeting. Consolidation is not limited to listed subsidiaries, and associates are included, so standalone statements cannot be dropped.

  1. AConsolidated financial statements are required only if the subsidiary is a listed company
  2. BThe company must prepare consolidated financial statements of itself and all its subsidiaries and associates, in addition to its standalone statements, and lay both before the annual general meetingCorrect
  3. CThe company may prepare only consolidated statements and need not prepare standalone statements
  4. DConsolidation applies only to the subsidiary; the associate is always excluded from consolidated statements

Explanation

Where a company has one or more subsidiaries or associate companies (including joint ventures), it must, in addition to its own standalone financial statements, prepare a consolidated financial statement and lay it before the AGM along with the standalone statements. Listing of the subsidiary is irrelevant, so option A is wrong. Associates are included, so D is wrong.

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