Consolidated Financial Statements

What are consolidated financial statements?

Consolidated financial statements (CFS) present a parent company and its subsidiaries as if they were a single business. The group's combined assets, liabilities, income, and expenses are shown together, with transactions between group companies eliminated, and associates and joint ventures accounted for using the equity method.

Under Section 129(3) of the Companies Act, 2013, a company with one or more subsidiaries, associates, or joint ventures must prepare CFS alongside its own standalone statements, and file them with the ROC.

The key terms

A few concepts explain how group accounts work:

Subsidiary

A company the parent controls — usually by holding more than half its shares or controlling its board. Its accounts are combined line by line.

Associate

A company over which the parent has significant influence, usually 20% or more of voting power, but not control.

Joint venture

An arrangement jointly controlled by the parent and others. Associates and joint ventures are generally accounted for by the equity method.

Eliminations

Sales, loans, and balances between group companies are removed, so the group isn't shown trading with itself.

Non-controlling interest

The share of a subsidiary owned by outside shareholders, shown separately in the group's equity and profit.

AOC-1

A statement attached to the financial statements summarising the key figures of each subsidiary, associate, and joint venture.

AOC-4 CFS

The form in which the consolidated statements are filed with the ROC, separately from the standalone AOC-4.

Why it matters

Group accounts show the full picture that standalone accounts can't:

It's mandatory

A company with subsidiaries, associates, or joint ventures must prepare CFS, unless an exemption applies.

True picture of the group

Standalone accounts show only the parent. Investors, lenders, and acquirers want to see the whole group.

Audited and adopted

CFS are audited and laid before the AGM along with the standalone statements.

Separate filing

They're filed separately in AOC-4 CFS, with its own deadline and fees.

Foreign subsidiaries count

Overseas subsidiaries are consolidated too, which means translating their accounts and aligning policies.

Consistency

Group companies need consistent accounting policies and reporting dates, or adjustments to bridge the differences.

Eliminations aren't trivial

Getting intercompany eliminations wrong overstates the group's revenue, profit, and assets.

Who is this for?

An intermediate company that is itself a subsidiary may be exempt from preparing CFS if its parent consolidates, subject to conditions — including not being listed and its minority shareholders not objecting.

How each group company is treated

The treatment depends on the relationship with the parent:

What we'll need from you

Standalone accounts

Audited financial statements of the parent and every subsidiary, associate, and joint venture.

Group structure

Holdings in each entity, and any changes during the year.

Intercompany details

Sales, purchases, loans, and balances between group companies, reconciled on both sides.

Foreign subsidiary data

Overseas entities' accounts, with exchange rates for translation.

Accounting policies

Each entity's policies, to align them with the parent's.

Acquisition details

For entities acquired during the year, the date and consideration, for goodwill or capital reserve.

Intercompany balances that don't match on both sides are the most common cause of delay.

How consolidation works

Group accounts are prepared after each entity's own accounts are final:

1. 1

   Map the group

   We confirm every subsidiary, associate, and joint venture, and the treatment for each.

2. 2

   Collect entity accounts

   Audited or near-final accounts are gathered from each group company.

3. 3

   Align and translate

   Policies are aligned, and foreign subsidiaries' accounts translated into rupees.

4. 4

   Reconcile intercompany items

   Balances and transactions between group companies are matched on both sides.

5. 5

   Consolidate

   Accounts are combined, eliminations made, non-controlling interests and equity-method investments calculated.

6. 6

   Prepare CFS and AOC-1

   The consolidated statements, notes, and AOC-1 are prepared for audit, AGM adoption, and filing.

After the group accounts are prepared

Consolidated statements follow the same approval path as standalone ones:

Audit

The parent's auditor reports on the consolidated statements as well as the standalone ones.

Board and AGM

The board approves both sets, and they're laid before the AGM together.

AOC-4 CFS

The consolidated statements are filed with the ROC in AOC-4 CFS.

Website and members

Where applicable, the accounts of subsidiaries are placed on the company's website and made available to members.

Group reporting pack

Build a reporting pack so group companies report intercompany data consistently next year.

Changes in holdings

Track acquisitions and disposals during the year, since they change what's consolidated.

Benefits and responsibilities