Requirement to Consolidate Financial Statements

As per AS-21, If CFS is presented, then provision of this AS should be followed it does not mandate consolidation of financial statements.

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.

FOR NON LISTED COMPANIES

Section 4.

Meaning of holding company and subsidiary.—

(1) For the purposes of this Act, a company shall, subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if, —

(a) that other controls the compositions of its Board of directors; or

(b) that other holds more than half in nominal value of its equity share capital; or

(c) the first-mentioned company is a subsidiary of any company which is that other's subsidiary.

Section 212

BALANCE SHEET OF HOLDING COMPANY TO INCLUDE CERTAIN PARTICULARS AS TO ITS SUBSIDIARIES.

(1) There shall be attached to the balance sheet of a holding company having a subsidiary or subsidiaries at the end of the financial year as at which the holding company's balance sheet is made out, the following documents in respect of such subsidiary or of each such subsidiary, as the case may be-

(a) a copy of the balance sheet of the subsidiary;

(b) a copy of its profit and loss account;

(c) a copy of the report of its Board of directors;

(d) a copy of the report of its auditors;

(e) a statement of the holding company's interest in the subsidiary as specified in sub-section (3);

(f) the statement referred to in sub-section (5), if any; and

(g) the report referred to in sub-section (6); if any.

In case of unlisted companies only section 212 will apply. Even Sec 212 of companies act does not require CFS to be presented, Only the details as required by Section 212 have to be attached with the balance sheet of the Holding accompany and there is no need to prepare the consolidated accounts for the holding company.

However if there are number of subsidiaries and it is not possible/ practical to lay all the details of all the companies then, as per MCA circular General Circular No: 2 /2011 dated 8^th Feb 11 then the company shall present in the annual report, the consolidated financial statements of holding company and all subsidiaries duly audited by its statutory auditors;