PPT: Accounting Standards (21) | Advanced Accounting for CA Intermediate PDF Download

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ACCOUNTING  STANDARD 21
CONSOLIDATION AND MINORITY 
INTEREST
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ACCOUNTING  STANDARD 21
CONSOLIDATION AND MINORITY 
INTEREST
OBJECTIVES
? The objective of this statement is to present financial statements 
of parent and its subsidiaries as a single economic entity. They 
are treated as one.
? Consolidated profit/loss account and consolidated balance sheet 
are prepared for disclosing the total profit/loss of the group and 
total assets and liability of the group.
? PARENT COMPANY:- It is an enterprise that has one or more 
subsidiaries.
? SUBSIDIARY COMPANY:- It is an enterprise that is controlled by 
other enterprises known as parent
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ACCOUNTING  STANDARD 21
CONSOLIDATION AND MINORITY 
INTEREST
OBJECTIVES
? The objective of this statement is to present financial statements 
of parent and its subsidiaries as a single economic entity. They 
are treated as one.
? Consolidated profit/loss account and consolidated balance sheet 
are prepared for disclosing the total profit/loss of the group and 
total assets and liability of the group.
? PARENT COMPANY:- It is an enterprise that has one or more 
subsidiaries.
? SUBSIDIARY COMPANY:- It is an enterprise that is controlled by 
other enterprises known as parent
MINORITY INTEREST
? Minority interest (also known as Non-controlling interest)  refers to 
the portion of a subsidiary corporation’s stock that is not owned by the 
parent corporation. 
? The magnitude of the minority interest in the subsidiary company is 
generally less than 50% of outstanding shares, else the corporation 
would generally cease to be a subsidiary of the parent.
? Minority interest belongs to other investors and is reported on the 
consolidated balance sheet of the owning company to reflect the claim 
on assets belonging to other  non-controlling shareholders. Also, 
minority interest is reported on the consolidated income statement as 
a share of profit belonging to minority shareholders.
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ACCOUNTING  STANDARD 21
CONSOLIDATION AND MINORITY 
INTEREST
OBJECTIVES
? The objective of this statement is to present financial statements 
of parent and its subsidiaries as a single economic entity. They 
are treated as one.
? Consolidated profit/loss account and consolidated balance sheet 
are prepared for disclosing the total profit/loss of the group and 
total assets and liability of the group.
? PARENT COMPANY:- It is an enterprise that has one or more 
subsidiaries.
? SUBSIDIARY COMPANY:- It is an enterprise that is controlled by 
other enterprises known as parent
MINORITY INTEREST
? Minority interest (also known as Non-controlling interest)  refers to 
the portion of a subsidiary corporation’s stock that is not owned by the 
parent corporation. 
? The magnitude of the minority interest in the subsidiary company is 
generally less than 50% of outstanding shares, else the corporation 
would generally cease to be a subsidiary of the parent.
? Minority interest belongs to other investors and is reported on the 
consolidated balance sheet of the owning company to reflect the claim 
on assets belonging to other  non-controlling shareholders. Also, 
minority interest is reported on the consolidated income statement as 
a share of profit belonging to minority shareholders.
FORMAT OF CONSOLIDATED FINANCIAL 
STATEMENTS
? Application of other accounting standards in preparation of 
consolidated financial statements would be in the same manner 
as they apply in preparing the separate financial statements.
? Consolidated financial statements are no substitutes for separate 
financial statements.
? Dissimilar activities of parent and its subsidiaries cannot be the 
ground for non-consolidation of financial statements.
? The parent company has to consolidate the financial statements 
of all its subsidiaries, whether domestic or foreign.
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ACCOUNTING  STANDARD 21
CONSOLIDATION AND MINORITY 
INTEREST
OBJECTIVES
? The objective of this statement is to present financial statements 
of parent and its subsidiaries as a single economic entity. They 
are treated as one.
? Consolidated profit/loss account and consolidated balance sheet 
are prepared for disclosing the total profit/loss of the group and 
total assets and liability of the group.
? PARENT COMPANY:- It is an enterprise that has one or more 
subsidiaries.
? SUBSIDIARY COMPANY:- It is an enterprise that is controlled by 
other enterprises known as parent
MINORITY INTEREST
? Minority interest (also known as Non-controlling interest)  refers to 
the portion of a subsidiary corporation’s stock that is not owned by the 
parent corporation. 
? The magnitude of the minority interest in the subsidiary company is 
generally less than 50% of outstanding shares, else the corporation 
would generally cease to be a subsidiary of the parent.
? Minority interest belongs to other investors and is reported on the 
consolidated balance sheet of the owning company to reflect the claim 
on assets belonging to other  non-controlling shareholders. Also, 
minority interest is reported on the consolidated income statement as 
a share of profit belonging to minority shareholders.
FORMAT OF CONSOLIDATED FINANCIAL 
STATEMENTS
? Application of other accounting standards in preparation of 
consolidated financial statements would be in the same manner 
as they apply in preparing the separate financial statements.
? Consolidated financial statements are no substitutes for separate 
financial statements.
? Dissimilar activities of parent and its subsidiaries cannot be the 
ground for non-consolidation of financial statements.
? The parent company has to consolidate the financial statements 
of all its subsidiaries, whether domestic or foreign.
CONSOLIDATION PROCEDURE
? Combined/added on line by line basis by adding the like items of 
assets, like items of liabilities, like items of income and 
expenses.
The cost to the parent of its investment in each subsidiary  
and the parent’s portion of equity of each subsidiary, at the 
date on which investment in each subsidiary is made, should 
be eliminated.
Any excess of the cost to the parent of its investment in a 
subsidiary over the parent’s portion of equity of the subsidiary, 
at the date on which investment in the subsidiary is made, 
should be described as goodwill to be recognised as an asset 
in the consolidated financial statements