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IAI Actuarial Core Principles · Business Finance · Regulation of financial reporting of incorporated entities

Tarang Industries Ltd has a subsidiary and an associate. Under the Companies Act 2013, which statement about consolidated financial statements is correct?

A company with subsidiaries, associates or joint ventures must prepare consolidated financial statements in addition to its own standalone statements, subject to exemptions in the rules. Consolidated statements do not replace standalone ones, and associates are equity accounted rather than consolidated line by line.

  1. AA company with subsidiaries, associates or joint ventures must, in addition to its standalone statements, prepare consolidated financial statements, subject to exemptions provided in the rulesCorrect
  2. BOnly listed companies prepare standalone statements, and none prepare consolidated ones
  3. CConsolidated statements replace standalone statements entirely
  4. DConsolidation is voluntary for all companies with subsidiaries
  5. Associates are consolidated line by line like subsidiaries

Explanation

The Act requires a company with subsidiaries, associates or joint ventures to prepare consolidated financial statements in addition to its standalone statements, subject to rule-based exemptions. They do not replace standalone statements. Associates are accounted for by the equity method, not line by line, which rules out the last option.

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