CONSOLIDATED FINANCIAL STATEMENTS ACCOUNTING STANDARD-21 CONSOLIDATED FINANCIAL STATEMENTS J.P., KAPUR & UBERAI

OBJECTIVE To formulate principles and procedures for preparation and presentation of consolidated financial statements. J.P., KAPUR & UBERAI

SCOPE APPLICABLE TO FOLLOWING ENTERPRISES Group of enterprises under the control of a parent. Investments in subsidiaries EXCLUDED CASES Amalgamations Investments in associates Investments in joint ventures J.P., KAPUR & UBERAI

DEFINITIONS CONTROL: More than one-half of the voting power of an enterprise; or Control of the composition of the Board of Directors in the case of a company so as to obtain economic benefits from its activities. J.P., KAPUR & UBERAI

COMPOSITION OF CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheet, Consolidated statement of profit and loss, Notes, additional statements and explanatory material that outline an essential part thereof NOTE: The consolidated financial statements are presented, to the extent possible, in the same format as adopted by the parent for its separate financial statements. J.P., KAPUR & UBERAI

SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements are compiled on the basis of financial statements of PARENT and all enterprises that are controlled by the parent. The consolidated financial statement of a parent organisation should encompass all the subsidiaries, both domestic and foreign companies. Contd…. J.P., KAPUR & UBERAI

SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS However, the parent shall not include its subsidiaries when: 1. Control is intended to be for a short-term & the subsidiary is acquired with a view to its subsequent disposal in the near future; or 2. it operates under severe long-term restrictions, which significantly impair its ability to transfer funds to the parent. J.P., KAPUR & UBERAI

CONSOLIDATION PROCEDURES BASIC PROCEDURE The financial statements of the parent and its subsidiaries should be combined on a ONE-TO-ONE BASIS by grouping together the like items of assets, liabilities, income and expenses. J.P., KAPUR & UBERAI

CONSOLIDATION PROCEDURES OTHER PROCEDURE The holding company should eliminate its cost of investment in each of its subsidiaries If cost of investment > holding’s share in equity GOODWILL If cost of investment < holding’s share in equity CAPITAL RESERVE contd…. J.P., KAPUR & UBERAI

CONSOLIDATION PROCEDURES Minority interests in the net income should be identified and adjusted against the income of the group in order to arrive at the net income attributable to the owners of the parent; and Minority interests in the net assets should be identified and presented in the consolidated balance sheet separately from liabilities and the equity of the parent's shareholders. J.P., KAPUR & UBERAI

DISCLOSURES The consolidated financial statements should disclose by way of a note - all subsidiaries including the name, country of incorporation or residence, proportion of ownership interest Intragroup balances and transactions and resulting unrealised profits should be wholly discarded. The financial statements used in the consolidation should be drawn up to the same reporting date. J.P., KAPUR & UBERAI

DISCLOSURES The consolidated financial statements should disclose the following wherever applicable: a. the nature of the relationship between the parent and a subsidiary, b. the impact of the acquisition and disposal of subsidiaries on the financial position c. the names of the subsidiary of which reporting date is different from that of the parent and the difference in reporting dates. J.P., KAPUR & UBERAI

DISCLOSURES Minority interests should be presented in the consolidated balance sheet separately from liabilities and the equity of the parent's shareholders. Consolidated financial statements should be prepared using uniform accounting policies. In case such uniform accounting policies cannot be incorporated in preparation of consolidated financial statements the same shall be disclosed. J.P., KAPUR & UBERAI