Consolidation of Financial Statements

 Section 212 of the Companies Act, 1956 via its sub section clearly cast an obligation to attach with the Balance Sheet of the Company certain specified document. kindly refer Section 212 (1) (a) to (g)

These documents are - Balance sheet, Profit & Loss Account, Director's Report, Auditor's Report, a statement of the holding company's interest in the subsidiary, a statement containing information specified in Section 212(5) and the report containing information specified in Section 212(6).

Now a company having a subsidiary has two options -

1. Prepare Consolidated Accounts; or

2. Comply the requirements of Section 212(1)

As per ICAI clarification AS-21 is mandatory if an enterprise presents consolidated financial statements. AS-21 does not mandate an entity to present consolidated financial statements, but where an entity presents consolidated financial statement on its own or for complying with the requirements of any statute of otherwise, it should prepare and present consolidated financial statements in accordance with AS-21

Section 212 applies to all companies i.e. public as well as private.so, in your case, pvt co. which holding co. is required to prepare consolidated financial statement of their susidiary(ies)

As per AS 21

A subsidiary is an enterprise that is controlled by another enterprise (known as the parent).

Control:

(a) The ownership, directly or indirectly through subsidiary (ies), of more than one-half of the voting power of an enterprise; or

(b) Control of the composition of the board of directors in the case of a company or of the composition of the corresponding governing body in case of any other enterprise so as to obtain economic benefits from its activities.

The Securities and Exchange Board of India, vide its circular SMI3RP/Policy/Cir.44/01 dated August 31, 2001 has amended clause 32 of the listing agreement which now requires the listed companies to publish consolidated financial statements in addi­tion to the separate financial statements in its annual report. The amended clause further requires that the statutory auditors of the company should audit the consolidated financial statements. The filing of consolidated financial statements with stock exchanges has also been made mandatory.

Similarly, the Reserve Bank of India, vide its circular no. DBOD No. BR13C. 72/21.04,018/2001‑02 dated February 25,2003 have required the banks to prepare consolidated financial statements to facilitate consolidated financial supervision.