CHAPTER-I INTRODUCTION The preparation of consolidated financial statement of the group comprising holding company and all its subsidiaries is mandatory with effect from the year ending 31st March, 2003. The principles and procedures for preparation of consolidated financial statement are laid down in the Accounting standard 21 (A 21! issued by the "#A". The standard is applicable to all the enterprises that prepare consolidated financial statements. "t is applicable by $irtue of %&" guidelines to listed companies. The consolidated financial statements shall be be presented in the same format for mat as that of the parent company. co mpany. The consolidated financial statements would include the following' a! &alance sheet b! )rofit and loss Account c! *otes to Accounts d! #ash #ash +lo +low w ta tatem tement ent (if (if the the pare parent nt com compa pany ny prese presents nts its its own own cash cash flow flow statem statemen entt ! e! egment eporting. #onsolidated financial statements are prepared in addition to separate financial statements of the parent and its subsidiaries. #onsolidated statements should be prepared for both domestic as well as foreign subsidiaries.
HOLDING COMPANY -olding company is the company which holds either all or maority of the shares of the other company. These shares are held in order to e/ercise control o$er the other company. The holding company de$ice was mainly used to further the combination mo$ement in order to eliminate competition and to establish a monopoly or near monopoly state. uch a
1
monopoly or near monopoly state can also be established with help of merger schemes lie Amalgamation or Absorption. &ut the disad$antage of merger scheme is that, the merged company will ha$e to be liuidated, as a result of which it will lose its separate and independent e/istence. This is not the case with holding company de$ice -olding of shares is to purchase the shares and own them. Thus what is important here is to purchase the shares of that other company. As the intention here is to e/ercise the control o$er the management of that other company, w hat is essential here is to ha$e 1 or more $oting power. "t may be pointed out that some disad$antage also follow with holding maority of $oting power lie, fraudulent manipulation of accounts oppression of maority, shareholders e/ploiting that other company to the ad$antage of holding company etc.
SUBSIDIARY SUBSIDI ARY COMPANY COMPANY The company whose shares are held is called as a subsidiary company. The subsidiary companies can either be partly owned or wholly owned subsidiaries. A wholly of partly owned subsidiary is one in which all the shares are owned by holding company.
2
"n case of partly owned subsidiary, only the maority of shares are owned by holding company. The owners of the remaining shares are called as Minority hareholders. Their interest in the *et Assets is called as Minority "nterest.
CHAPTER-II ANALYSE OF RESERVES & SURPLUS OF SUBSIDIARY COM COMPA PANY NY
Analysis of profit of subsidiary company as pre4acuisition profit and post acuisition profit is done on the basis of date of acuisition of shares by the holding company. )rofits earned by the subsidiary company upto date of acuisition of shares by -olding company are called as pre4acuisition profits or capital profits. The profit earned by the 3
subsidiary company after the acuisition of shares by the holding company is called as )ost acuisition profits or e$enue profits. The loss of the subsidiary company upto the date of acuisition is treated as a capital loss and subseuent to the acuisition as a e$enue loss. The reser$es to be analysed shall be the reser$es as appearing in the &alance sheet of the subsidiary company as on the date of preparation of consolidated &alance sheet. uch reser$es are subect to adustments relating to proposed di$idends, &onus 5 unaccounted items such as interest payment due to or due from subsidiary company. "f the subsidiary has cumulati$e preference shares on which di$idend has not been pro$ided for or di$idend is in arrears, the same should be pro$ided. "f in$estments are made during the financial year, the profits should be apportioned on a reasonable basis i.e. on the basis of time. The assumption being that profits ha$e accrued e$enly during the year.
CAPITAL CAPITAL PROFIT PROFI T eturn of capital is the distribution of cash that resulted from ta/ sa$ings on depreciation, sale of a capital asset or securities, or any other sources unrelated to retained earnings. The amount The amount by by which an asset6s selling price e/ceeds its initial its initial purchase purchase price. price. A reali7ed capital reali7ed capital gain gain is is an in$estment an in$estment that that has been sold at a profit. a profit. A An n unreali7ed capital gain 4
is an in$estment that hasn6t been sold yet but would result in result in a profit if sold. #apital gain is often used to mean reali7ed capital gain. +or most in$estments most in$estments sold sold at a profit, including mutual funds, funds, bonds, bonds, options, options, collectibles, collectibles, homes, and businesses and businesses,, the " is " is owed money called money called capital gains ta/. ta/. 8pposite of capital capital loss. loss.
REVENUE PROFIT "n business "n business usage, usage, re$enue is income recei$ed by an organi7ation in the form of cash or cash or cash eui$alents. ales re$enue or re$enue or re$enues is income recei$ed from selling goods or ser$ices o$er a period of time. Ta/ Ta/ re$enue re$ enue is is income that a go$ernment recei$es from ta/ payers. 9ine a double4entry booeeping system, system, re$enue accounts are general are general edger accounts accounts that are summari7ed periodically under the heading e$enue or e$enues on an income statement. e$enue account, re$enue or turno$er is income that income that a company recei$es company recei$es from its normal business acti$ities, usually from the sale of ser$ices to customers. "n many countries, such as the :nited ;ingdom, re$enue is referred to as turno$er.
REVALUTION OF ASSETS OF SUBSIDIARY COMPANY
figures. "f there is an increase in the boo $alue of an asset the same should be treated as pre4 acuisition profit. The total profit will be apportioned and will be used in calculation of goodwill 5 capital reser$e and minority interest. "f the re$aluation results in a loss, the cost of control on $alue of goodwill or capital reser$e increased.
DEPRECIATION ADJUSTMENT
CHAPTER-III INTER COMPANY DIVIDEND -olding company owns larger portion of the shares of the subsidiary company.
Dividend paid !" # p$e-a%!i'i"in p$#i" () "*e '!('idia$) %+pan) =i$idend recei$ed from pre4acuisition profit of the subsidiary company, should be treated as return of capital to the holding company as it transfers to the holding company part of the net asset in the subsidiary company. "n such a situation, the correct effect would be to deduct such di$idend from the cost of in$estment in the subsidiary company for calculation of >oodwill or #apital reser$e.
Divi Divide dend nd paid paid !" !" # p'" p'" a%! a%!i' i'i" i"i in n p$ p$# #i" i" () "* "*ee '!(' '!('id idia ia$) $) %+pan) "f di$idend is recei$ed by the holding company from its subsidiary out of post acuisition profit, it is treated as in$estment in$ estment income and credited to profit and loss account accou nt of the holding company.
CHAPTER-IV COST OF CONTROL =etermine #ost of #ontrol "t is an important aspect of consolidation of accounts to find out either goodwill or capital reser$e at the acuisition of shares in subsidiary company. +ollowing two steps should be taen to decide cost of control'
7
A. =eterm =etermine ine cost cost of in$es in$estme tment' nt' #ost of in$estment is calculated as follows' Amount in$ested (#ost as per -olding #ompanies balance sheet! 9ess' =i$idend recei$ed from subsidiary out 8f pre4acuisition profit #ost of preference shares in subsidiary company Adusted cost of in$estment &. =eterm =etermine ine $alue $alue of in$es in$estm tment' ent' -olding #ompany?s share of capital Add' -olding #ompany?s share of capital profit @alue of in$estment
// // // //
// // //
CAPITAL RESERVE #ontributions to the capital reser$e account can be made from go$ernment subsidies, donated funds, or can be set aside from the firm6s or municipality6s regular re$enue4generating operations. 8nce recorded on the reporting entity6s balance sheet, these funds are only to be spent on the capital e/penditure proects for which they were initially intended, e/cluding any unforeseen circumstances.
GOOD,ILL >oodwill is an accounting concept meaning the $alue of an asset owned that is intangible but has a uantifiable prudent $alue in a business for e/ample a reputation the reputation the firm enoyed with its clients. +or e/ample, a software company software company may ha$e net assets (consisting assets (consisting primarily of miscellaneous euipment, and assuming no debt! $alued at B1 million, but the company6s o$erall $alue (including brand, customers, intellectual capital! is $alued at B10 million. 8
Anybody buying that company would boo B10 million in total assets acuired, comprising B1 million physical assets, and BC million in goodwill. "n a pri$ate company, goodwill has no predetermined $alue prior p rior to the acuisition acuisition its magnitude depends depend s on the two other $ariables by definition. A publicly traded company, by contrast, is subect to a constant process of maret $aluation, so goodwill will always be apparent.
CHAPTER-V
MINORITY INTEREST
9
As per A 21 minority "nterest consists of share in euity on the date of acuisition and share in mo$ement in euity since the date of acuisition share of minority should be separately calculated for pre4acuisition and post acuisition period. +rom holding company?s point of $iew the abo$e distinction assumes greater significance. hare in euity on the date of acuisition affects >oodwill5cost of control and share in mo$ement in euity since the date of acuisition affects consolidated eser$es D surplus.
CHAPTER-VI
INTER COMPANY TRANSACTIONS 8ne important step in consolidated of accounts is elimination of mutual indebtedness. "t includes' a! b! c! d! e!
@alue of of shares shares held held in subsi subsidiar diary y. 9oans to and from subsidiary. subsid iary. =ebentur =ebentures es of one comp company any held held by by anothe another. r. "nter "nterest est and and di$i di$iden dend d due. due. "nter4company "nter4company bills of of e/change, e/change, undry undry #reditors, #reditors, undry =ebtors
"t should be ensured that the effect of elimination is eual and opposite sides. A 21 reuires that intra4group balances and intra4group transactions should be eliminated.
UNREALISED INTER COMPANY PROFITS STOC. RESERVE/ ometimes ometimes goods sold by one company to another company at a profit ha$e not been resold by the recipient recipient company company at the date of balance balance sheet but are included included in the stoc at a price price at
10
which they are in$oiced by the selling company. The general rule is that the profit on the transaction must not remain in the #onsolidated &alance heet. This must be deducted from the stoc and from the consolidated profit in the consolidated accounts. As per A 21, full amount of unreali7ed profit is deducted from stoc on asset side and also from profit D loss A5c on liability side of the consolidated balance sheet.
CHAPTER-VII
BALANCE SHEET A financial statement that summari7es a company6s assets, liabilities and shareholders6 euity at a specific point in time. These three balance sheet segments gi$e in$estors an idea as to what the company owns and owes, as well as the amount in$ested by the shareholders.
LIABILITY +inancial accounting, accounting, a liability is defined as an obligation of an entity arising from past transactions transactions or e$ents, the settlement of which may result in the transfer or use of assets assets,, pro$ision of ser$ices or other yielding of economic benefits in the future. A liability is defined by the following characteristics'
SHAREHOLDERS The term has se$eral meanings. "n its narrow, classical sense, still commonly used in accounting, accounting, share capital comprises the nominal $alues of all shares issued (that is, the sum of their par $alues!. "n a wider sense, if the shares ha$e no par $alue or the allocation price of shares is greater than their par $alue, the shares are said to be at a premium (called share premium, premium, additional paid4in capital or paid4in capital in e/cess of par! in that case, the share
11
capital can be said to be the sum of the aforementioned nominal share capital and the premium. "n the modern law of shares, sha res, the par $alue concept has diminished in importance, and share capital can simply be defined as the sum of capital (cash or other assets! the company has recei$ed from in$estors for its shares.
RESERVES AND SURPLUS eser$es and surplus at the end of an accounting period the company may decide to transfer part of the profits to a reser$e res er$e and retain the balance b alance in the profit and loss lo ss account. The reser$e created out of profits transferred from profit and loss account is called general reser$e. The balance in the profit prof it and loss account is called a surplus and will be shown under un der this head in the balance sheet.
SECURED LOAN "f a loan is Esecured?, it means it is secured against something you own (an Easset?! F and failing to repay the loan could result in the lender taing possession of that asset, and selling it to co$er their losses. The asset in a secured loan will normally be your home, but it can also be your car or another item of a high $alue.
UNSECURED LOAN An unsecured loan does not reuire you to secure anything against the loan F the lender relies on your contractual obligation to pay it bac.
12
&ecause there is no security and the ris they are taing is therefore greater, the amount you can borrow tends to be less, less , and the repayment period is usually shorter.
CURRENT LIABILITIES A company6s debts or obligations that is due within one year. #urrent liabilities appear on the company6s balance sheet and include short term debt, accounts payable, accrued Analysts and creditors will often use the current ratio, (which di$ides current assets by liabilities!, or the uic ratio, (which di$ides current assets minus in$entories by current liabilities!, to determine whether a company has the ability to pay off its current liabilities.
PROVISION "n financial accounting, accounting, pro$ision is a word that creates an ambiguous account title. "n :.. >AA), pro$ision means an e/pense, while in "+, "nternational +inancial eporting tandards, it means a liability. o, in the :.., )ro$ision for "ncome Ta/es means the same thing as "ncome Ta/ %/pense, while under "+, )ro$ision for "ncome Ta/es means 9iability for "ncome Ta/es )ayable. Another e/amples is pro$isions for warranty costs Ge/pense in the : and liability in "+H. ometimes in "+, but not in : >AA), the term reser$e is reser$e is used instead of term pro$ision such a use, howe$er, is inconsistent with the terminology suggested by "nternational Accounting tandards &oard. &oa rd.Gcitation needed H eser$e, which seems to be one of the most confusing terms in accounting, has the connotation of a debit balance to non4professionals
13
but in accounting always alwa ys means an account with a credit cred it balance. eser$e for
CURRENT ASSETS "n financial accounting, accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce $alue and that is held to ha$e positi$e economic $alue is considered an asset. imply stated, assets represent $alue of ownership that can be con$erted into cash (although cash itself is also considered an asset!. an asset on on the balance the balance sheet which sheet which can either be con$erted to cash or used to C!$$en" a''e" is an asset pay current liabilities within 12 months. Typical Typical current assets ass ets include cash, cash, cash , short4term in$estments, accounts recei$able, recei$able, in$entory and in$entory and the portion of prepaid liabilities which will be paid within a year. 8n a balance a balance sheet, sheet, assets will typically be classified into current assets and long4term and long4term assets. assets.
FI0ED ASSETS +i/ed assets, also nown as a non4current asset or as property, plant, and euipment ())D%!, is a term used in accounting in accounting for for assets and assets and property property which which cannot easily be con$erted into cash. This can be compared with current assets such assets such as cash or ban accounts, which are described as liuid assets. assets. "n most cases, only tangible assets are referred to as fi/ed. 14
INVESTMENT "n$estment has different meanings in finance and economics. +inance in$estment is putting money into something with the e/pectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an e/pected period of time. As such, those shareholders who fail to thoroughly analy7e their stoc purchases, such as owners own ers of mutual funds, could well be b e called gamblers. "ndeed, gi$en the efficient maret hypothesis, which implies that a thorough analysis of stoc data is irrational, most rational shareholders are, by definition, not in$estors, but speculators. "n$estment is related to sa$ing or sa$ing or deferring consumption deferring consumption.. "n$estment is in$ol$ed in many areas of the economy the economy,, such as business as business management and management and finance whether finance whether for -ouseholds, +irms, or >o$ernments.
LOANS AND ADVANCES 9oans and ad$ances for financing of current assets is a short4term loan for companies needing a short4term increase in current assets in case of seasonal necessity (#hristmas, winter or summer goods, etc.! or for a separate proect reuiring the finances for purchasing of stoc.
A loan for financing of current assets can also be used for implementation of new proects, e.g., launch of a new line of goods where it is necessary to ensure a full spectrum of goods, while suppliers do not offer deferred payment terms yet. The loan repayment taes place gradually each month from the positi$e cash flow generated from the proect.
15
CHAPTER-VIII PROBLEMS
,ITH
SOLUTION
123 T*e #445in6 a$e "*e (a4an%e '*ee" # Y!7"i L"d2 and S*a7"i L"d2 A' n 83 '" Ma$%* 9:3:;
9A"&"9"
Iuti 9td. s
hati 9td. s
A Iuti 9td. s
T"%
%T
S*a$e Capi"a4 %uity shares of s.1054 12,00,000
Fi
each eser$es5urplus >eneral eser$e )rofit59oss A5# #urrent 9iab. #reditors &ills )ayable 8utstanding %/p. Total
J,0,000 1,K0,000
L,00,000
1,00,000 2,J0,000
1,0,000 1,L,000 0,000
K,000 30,000
ecei$able &an &alance
21,,000
11,1,000
Total
hati 9td. s
L,0,000 3,C0,000 L0,000 ,00,000
J,J0,000 1,J0,000 3,000
1,20,000 3,0,000
1,C0,000 2,L0,000
K0,000 1,000
J0,000 10,000
21,,000
11,1,000
The following further information is a$ailable4 1! Iuti uti 9td. Acuired Acuired J,000 J,000 shares of hati 9td. 9td. As As on 31st March ,200C 2! undry debtors debtors of Iuti 9td. include s.2000 s.2000 due due for hati hati 9td. 3! &ills recei$abl recei$ablee of hati 9td. 9td. "nclude "nclude s 1000 1000 due from Iuti 9td. 16
J! The toc toc of hati 9td. 9td. "ncludes "ncludes good purchased purchased from Iu Iuti ti 9td. 8f s. s. 20000 which includes profit charged by Iuti 9td N 2 on cost. ! Th Thee posi positi tion on of rese reser$ r$es es and surp surplu luss of hat hatii 9td. 9td. As on 31stMarch,200C was as follows' >eneral eser$e s. K000 )rofit an and 9o 9oss Account s. 1 10000 Iou are the reuired to prepare a #onsolidated &alance heet of Iuti Iuti 9td. and hati 9td. as on 31st March 2010 along with necessary woring for Minority "nterest etc.
SOLUTION; )roportion of -olding hares Iuti? ti?ss share sharess in ha hati ti ltd. ltd.
O J000PL0000Q100 O K
hati ltd.
O 1000PL0000 Q100 O 2
ANALYSIS OF RESERVE & SURPLUS OF SUBSIDIAREY
s.
s. (14J4 (14J4200 200C C to 314
)AT"#:9A
>eneral eser$e Add' ) D 9 A5c
-olding hare (K! Minority "nterest (2!
#A)"TA9
342010! %@%*:%
)8+"T K000 10000
)8+"T 2000 C0000
22 22000
1LK0 L20
11000
L20 2K0 17
COST OF CONTROL #ost of "n$estment 9ess' hare capital (L00000QK! 9ess' #apital )rofit #A)"TA9 %%@%
0 00 0 0 J 00 00 1 L K 0 11K0
MINORITY INTEREST hare capital (L00000Q2! Add' #apital )rofit Add' e$enue )rofit T8TA9
1 00 0 0 L2 0 2 K 0 23 0 00
PROFIT & LOSS A=C ) D 9 A5c Add' e$enue )rofit 9ess' toc eser$e (20000Q20! ) D 9 A5c
1K 00 00 L2 0 J0 00 2 22 0
CONSOLIDATED BALANCE SHEET as on 314342010
9"A&"9"T"%
s.
A%T
s.
18
SHARE CAPITAL 120000 %. hares of s. 10 each RESERVE & SURPLUS #apital eser$e >eneral eser$e ) D 9 A5c Minority "nterest SECURED LOANS
FI0ED ASSETS 1200000 &uilding Machinery +urniture 11K0 INVESTMENTS J0000 CURREN CURRENT T ASSET ASSETS> S> LOANS LOANS 2220 23000 & ADV AD VANCE toc 310000 9ess' toc reser$e J000 =ebtors LJ0000
10C0000 30000 C000
30L000 L1000
UNSECURED LOANS
9ess' et off 2000 &ills ecei$able' 110000 CURR CURREN ENT T LIAB LIABIL ILIT ITIE IES S & 9ess' et off 1000 &an PROVISIONS #reditors 22000 200000 MISCELLANEOUS 9ess' et off 2000 &ills )ayable 23000 220000 E0PENDITUES 9ess' set off 1000 0000 (to the e/tent not written off! 8utstanding %/penses
Total
2 K L 0 0 0
Total
C000 2000
2K L 00 0
1/ 92 T*e (a4an%e '*ee" # A4(e$" Li+i"ed and Ba44avi Li+i"ed a' n 83 '" Ma$%*> 9:3: ,e$e a' #445';
19
9iabilities
Albert 9td.s
&alla$i 9td.s
hare capital (%uity hare of s. 1054each! >eneral eser$e on14J4200C undry creditors &ills payable )rofit and 9oss Account on 14J4200C )rofit for the year ended 314342010
1000000 200000 200000 0000 L0000 10000
20000 0000 100000 30000 L0000 0000
Total
1L00000
K 0 0 00
Albert 9td. s 100000 200000
&alla$i 9td. s 0000 100000 200000 100000 K0000 4 30000 20000
As A ssets
>oodwill &uildings Machinery toc undry =ebtors "n$estment &ills recei$able #ash and &an &alance Total
00000 200000 3J0000 2J0000 30000 0000 1 L L0 00 0
K 0 00 0
The following information is gi$en' 1! Albert Albert 9td. Acui Acuired red 1,000 1,000 %uity hares hares of &alla$i &alla$i 9td. +or s.1C000 s.1C0000 0 on 14J4 200C. 2! undry =ebtors =ebtors of Albert Albert 9td. "nclude s. s. 30000 due due from &alla$i &alla$i 9td. 9td. 3! &ills ecei$abl ecei$ablee of &alla$i &alla$i 9td. "nclude "nclude s.10000 s.10000 due from Albert Albert 9td. J! The stoc stoc of &alla$i &alla$i 9td. "nclude "nclude >oods >oods purchase purchased d from Alber Albertt 9td. at s 10,000 10,000 which include profit charged by Albert ltd. N 2on cost. ! Albert 9td. 9td. A*= A*= &alla$i &alla$i 9td. -a$e proposed proposed 10=i$ident 10=i$ident for for 200C42010 but effect effect has not been in account. 20
)repare consolidated consolidated balance sheet of albert ltd. and balla$i ltd. as at 31 march2010 with woring of minority interest and cost of control.
SOLUTION' P$p$"in # H4din6 S*a$e'
Albe Albert rt??s shar shares es in &all &alla$ a$ii
O 100 1000P 0P2 200 000 0 Q100 Q100 O L0 L0
&alla$i
O 10000P2000 Q100 O J0
ANALYSIS OF RESERVE & SURPLUS OF SUBSIDIAREY
s.
s. (14J (14J42 4200 00C C
to
)AT"#:9A
>eneral eser$e Add' ) D 9 A5c Ass' )rofit for the yr. 9ess' )roposed =i$idend (10!
-olding hare (L0! Minority "nterest (J0!
#A)"TA9
314342010! %@%*:%
)8+"T 0000 L0000 4 4 1 J0 00 0
)8+"T 4 4 0000 2000 2 0 00
COST OF CONTROL #ost of "n$estment 9ess' hare capital (20000QL0! 9ess' #apital )rofit #A)"TA9 %%@%
1 C 00 0 0 1 00 00 J 0 00 J J 0 00
MINORITY INTEREST hare capital (20000QJ0! Add' #apital )rofit Add' e$enue )rofit Add' )roposed =i$idend (2000QJ0! T8TA9
1 0 00 0 0 L0 00 1 00 00 1 0 0 00 1K L0 00
PROFIT & LOSS A=C 8pening ) D 9 A5c
J000 L000
1000 10000
L 00 00 21
Add' ) D 9 A5c Add' e$enue )rofit Add' )roposed di$idend (2000QL0! 9ess' proposed di$idend (1000000Q10! 9ess' toc eser$e (10000Q20! ) D 9 A5c
1 00 0 0 1 0 00 1 0 00 10 00 00 20 00 13 0 00
CONSOLIDATED BALANCE SHEET as on 314342010 9"A&"9"T"%
s.
-A% #A)"TA9 100000 %. hares of s. 10 each %%@% D :)9: #apital eser$e >eneral eser$e ) D 9 A5c Minority "nterest %#:%= 98A* :*%#:%= 98A* #:%*T
9"A&"9"T" "T"%
)8@""8* #reditors 9ess' et off &ills )ayable 9ess' set off )roposed =i$idend
D
300000 30000 0000 10000
A%T
s.
+"R%= A%T 1000000 >oodwill &uilding Machinery JJ000 200000 "*@%TM%*T 13000 1KL000 #:%*T A%T, 98A* D A=@A*#% toc 300000 9ess' toc reser$e 2000 =ebtors J10000 9ess' set off 30000 &ills ecei$able L0000 9ess' et4off
10000 300000 K00000 0000
2C000 30000 0000 K0000
2K0000 10000 &an K0000 100000 M"#%99A*%8: %R)%*="T:%
Total
1 CC 0 0 0
Total
1 C C 0 00
1/ 8/ Ba4an%e S*ee" # A L"d and B L"d a' n 83 ? 8 ? 9:39 9:39 a' #445ed #445ed
9iabilities
A 9td
& 9td
Assets
A 9td
& 9td
22
hare #apital ( s 100 !
200000
2000000
>eneral eser$e
00000
L00000
) D 9 A5#
300000
3L0000
&an 9oan
200000
2J0000
J00000 3 C0 00 00
J00000 3 L 0 0 00 0
+i/ed Assets
1L0000
100000
"n$estment
J0000
300000
#urrent Assets
100000
100000
#urrent 9iabilities Total
Total
3C00000
3L 00 00 0
Addi"ina4 In#$+a"in;
8n 14K42011 A 9T= 9T= )urchases 1J000 share of & 9T= 9T= at the th e rate of 1J per share. 1. 8n 14J42011 14J42011 & 9T 9T= at a &alance &alance of eser$e of J00000 D ) D 9 A5# A5# 200000 . 2. #urrent As Assets sets of A 9T= included included L0,000 ecei$able ecei$able from & 9T 9T=. 3. )repaid )repaid the #onsoli #onsolidate dated d &alance &alance heet heet
SOLUTION; )roportion of -olding hares
A share in & ltd.
O 1J000P20000 Q100 O K0
& ltd.
O L000P20000 Q100 O 30
A*A9I" 8+ %%@% D :)9: 8+ :&"="A%I
23
s. )AT"#:9A
>eneral eser$e Add' ) D 9 A5c
-olding hare (L0! Minority "nterest (J0!
s. (14K420011 314342012!
#A)"TA9
%@%*:%
)8+"T
)8+"T
J00000 0000 200000 J0000 L C0 00 0
J3000 20K000
COST OF CONTROL #ost of "n$estment (1J000 sharesQ1J! 9ess' hare capital (1J000Q100! 9ess' #apital )rofit #A)"TA9 %%@%
1CL000 1 J0 0 0 0 0 J 30 0 0 1 L K 0 0 0
MINORITY INTEREST hare capital (200000041J00000! Add' #apital )rofit Add' e$enue )rofit T8TA9
L0 00 00 2 0K 00 0 1 0 00 0 00
PROFIT & LOSS A=C 8pening ) D 9 A5c Add' ) D 9 A5c ) D 9 A5c
30 00 0 0 1 C 0 0 0 J C 0 00
10000 4 4 120000 2 K0 0 0 0 1C000 1000
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CONSOLIDATED BALANCE BAL ANCE SHEET OF A LT LTD D & B LT LTD D 9iabilities hare #apital
Amount 2,00,000
Assets +i/ed Assets
Amount 33,L0,000
>eneral eser$e
,00,000
"n$estment
L,JJ,000
) D 9 A5#
J,C,000
#urrent Assets
32,J0,000
#apital eser$e
1L,K,000
&an 9oan
J,J0,000
#urrent 9iabilities
K,J0,000
Minority "nterest
,,000
Total
K2,JJ,000
Total
K2,JJ,000
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CHAPTER-I0
SUMMARY 1. 2.
#onsolidation of accounts is go$erned by A 21 The date of purchase of shares is the date of acuisition of shares which is $ery important
3. 4. 5.
in consolidation. )rofit upto the date of acuisition is the capital profit )rofit from the date of acuisition is the re$enue profit )re4acuisition profits and reser$es are taen into account for calculation of cost of
6. 7. 8.
control. )ost acuisition profits are not considered in determination of cost of control. "nter4company transactions are eliminated from the consolidated balance sheet. hare capital of subsidiary company and in$estment in share if subsidiary of company
should be eliminated. 9. Minority interest is shows in consolidated balance sheet on liability side. 10. #ash in transit is shown in consolidated balance sheet on assets side. 11. "n the case of re$aluation of any asset the change in the $alue is adusted to capital profit. 12. Any unreali7ed profit include in the stoc is deducted from stoc and ) D 9 a5c in consolidated balance sheet. 13. "ssue of bonus shares by the subsidiary company should be added to the shares held by holding #ompany in subsidiary #ompany Minority interest is also increased by the bonus shares "ssued to them and the capital profit or re$enue profit from which bonus issue is made is reduced.
CHAPTER-0
BIBLIOGRAPHY BOOK:
26
1. 2.
Ad$anced +inancial Accounting Accounting &y 9.* #hopde D =.- #houdhari Ad$anced +inancial +inancial Accounting Accounting &y =r. @arsha M. Ainapure Ainapure
WEBSIDE:
1. www.investopedia.com/ter www.investopedia.com/terms/c/consolidated ms/c/consolidatedfnancialstatement.asp fnancialstatement.asp#a #a x257!"$d" 2. www.mca.%ov.in/ministr&/notifcatirs/pd/!'(21.pd
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