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    Accounting Standard (As) 21

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    Ajay Ghotia
    This document summarizes Accounting Standard 21 regarding consolidated financial statements in India. It defines key terms like subsidiary, control, and minority interest. It specifies that a parent company must prepare consolidated financial statements presenting the group as a single economic entity. Subsidiaries may be excluded only if control is temporary or long-term restrictions impair ability to transfer funds. The standard also addresses presenting minority interest and illustrating the preparation of consolidated financial statements.

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    Accounting Standard (As) 21

    Uploaded by

    Ajay Ghotia
    544 views13 pages
    This document summarizes Accounting Standard 21 regarding consolidated financial statements in India. It defines key terms like subsidiary, control, and minority interest. It specifies that a parent company must prepare consolidated financial statements presenting the group as a single economic entity. Subsidiaries may be excluded only if control is temporary or long-term restrictions impair ability to transfer funds. The standard also addresses presenting minority interest and illustrating the preparation of consolidated financial statements.

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    Accounting Standard (as) 21

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    This document summarizes Accounting Standard 21 regarding consolidated financial statements in India. It defines key terms like subsidiary, control, and minority interest. It specifies that a parent company must prepare consolidated financial statements presenting the group as a single economic entity. Subsidiaries may be excluded only if control is temporary or long-term restrictions impair ability to transfer funds. The standard also addresses presenting minority interest and illustrating the preparation of consolidated financial statements.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    544 views13 pages

    Accounting Standard (As) 21

    Uploaded by

    Ajay Ghotia
    This document summarizes Accounting Standard 21 regarding consolidated financial statements in India. It defines key terms like subsidiary, control, and minority interest. It specifies that a parent company must prepare consolidated financial statements presenting the group as a single economic entity. Subsidiaries may be excluded only if control is temporary or long-term restrictions impair ability to transfer funds. The standard also addresses presenting minority interest and illustrating the preparation of consolidated financial statements.

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    ACCOUNTING STANDARD (AS) 21

    Consolidated Financial Statements

    Consolidated Financial Statements


    Accounting Standard (AS) 21, Consolidated

    Financial Statements. Issued by the Council of the Institute of Chartered Accountants of India. Comes into effect in respect of accounting periods commencing on or after 1-4-2001. An enterprise that presents consolidated financial statements should prepare and present these statements in accordance with this standard.

    Objective
    The objective of this Statement is to lay down principles and procedures for preparation and

    presentation of consolidated financial statements. Consolidated financial statements are presented by a parent (also known as holding enterprise) to provide financial information about the economic activities of its group. These statements are intended to present financial information about a parent and its subsidiary(ies) as a single economic entity to show the economic resources controlled by the group, the obligations of the group and results the group achieves with its resources.

    Key Definitions
    Subsidiary

    Enterprise controlled by another enterprise

    Control

    The ownership, directly or indirectly through subsidiary(ies), of more than one-half of the voting power of an enterprise Control of the composition of the board (in case of company) or the corresponding governing body (other enterprises) so as to obtain economic benefits from its activities

    Key Definations
    Minority interest

    net results of operations and net assets of a subsidiary attributable to interest not owned, directly or indirectly through subsidiary(ies), by the parent.

    Equity

    Residual interest in the assets of an enterprise after deducting all its liabilities i.e. net worth

    Exclusions
    Subsidiary to be excluded from consolidation when:
    Control is intended to be temporary intention to

    dispose off investments within 12 months from acquisition/investments held as stock in trade
    It operates under severe long-term restrictions

    which significantly impair its ability to transfer funds to the parent


    AS 13 to be applied Consolidated Financial Statements to disclose

    reasons for exclusion

    Presentation of Consolidated Financial Statements


    Users of the financial statements of a parent are

    usually concerned with, and need to be informed about, the financial position and results of operations of not only the enterprise itself but also of the group as a whole. This need is served by providing the users (a) separate financial statements of the parent; and
    (b) consolidated financial statements, which present

    financial information about the group as that of a single enterprise without regard to the legal boundaries of the separate legal entities.

    Minority Interest
    1. The parent can gain control of a subsidiary with a smaller capital investment and

    therefore put less capital at risk to loss. Parent companies generally gain control of a subsidiary when the ownership percentage exceeds 50 percent. A 51 percent investment in a subsidiary requires less capital than a 100 percent investment. 2. Some shareholders of the subsidiary may be unwilling to sell their shares, so the parent cannot acquire 100 percent.

    Illustration

    Comparison with IAS 27


    Difference due to legal and regulatory

    environment. Keeping in view the requirements of the law governing the companies, AS 21 defines control as ownership of more than one-half of the voting power of an enterprise or as control over the composition of the governing body of an enterprise so as to obtain economic benefits. This definition is different from IAS 27, which defines control as the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.

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