NTATION ON –

LIDATION FINANCIAL STATEMENTS AS 21

NTING FOR TAXES ON INCOME AS 22

NTING FOR INVESTMENTS IN ASSOCIATES IN CONSOLI

CIAL STATEMENTS AS 23

NTINUING OPERATIONS AS 24

PRESENTED BY-
ASHOK KUMAR GUPTA
MBA 1ST SEM
FMS (BHU) 1
• OBJECTIVE-The objective of this statement is to
present financial statements of a parent and its
subsidiary as a single economic entity.

• What is a parent-a parent is an enterprise that

has one are more subsidiaries.
• SUBSIDARY-it is an enterprise that is controlled by
another enterprise known as parent

2
ormat of consolidated Financial statements
hese are presented in the same format as as that foll
parent for preparation of its separate financial statem

COPE OF CONSOLIDATED FINANCIAL STATEMENT-

A parent ,which is required to prepare the consolidate
inancial statements , should Consolidated financial
tatements of all its subsidiary weather domestic or fo

ONSOLIDATION PROCEDURE-In preparing consolidate

inancial statement s the Financial statements of the p
and its subsidiary should be combined/added
n line by line basis by adding the like items of assets
ke items of liabilities ,like
tems of income and expenses.
3
DISCLOSURE-

List of all subsidiaries

Proportion of ownership interest
Nature of relationship between parent and
subsidiary
weather direct control
Name of the subsidiary which reporting
date are different

The fact for different outing policies

applied for
preparation Of consolidated financial
statements
If consolidated of particular subsidiary has
not been made 4
ENAERAL CLASSIFICATION ISSUED BY THE ICA

ne subsidiary has two parents(GC-16/2002)

x expenses(GC-18/2002)

oting power shares are held as stock in trade

GC-17/2002)

otes and information disclosed in separate

nancial statement (GC-5/2002)
5
PROBLEM-

NDA LIM ITED own 75% of the voting power

share of
induga LtdOn 1-4-2001 for Rs. 2,000,000. he
net asset of induga ltd on 1-4-2001 Was
2,000.000. on
investments in induga limited was sold for
Rs ,
3,100,000. The net asset of induga ltd on
31-3-2002
was Rs. 3000,000and RS .3,200,000Resp.the
difference representing the profit for the six
month 6
SOLUTION
Net assets of indiguas ltd
Amount
(subsidiary) on the date of disposal (1-10-2002)
3,200,000
Less : monetary interest 25%
- 8,00,000

------------------
NDA parents share in Induga ltd
2,400,000

-----------------
Proceeds from disposal of subsidiary
3,100,000
Less: Parents share in the net asset of the
subsidiary (75% of Rs. 3,200,000)
2,400,000 7
 ACCOUNTING FOR TAXES ON INCOME
(AS 22)

This accounting Standard prescribes the accounting

treatment for taxes
On income . According to this AS-22 tax on income is
determineed on the
principle of accrual concept.

Accrual concept—Tax should be accounted in the per

which
corresponding revenue and expanses are accounted
simple
words tax shall be accounted on accrual basis not on
basis.

SCOPE—Taxes on income include all domestic and fo

8
DIFFERENCE IN ACCOUNTING PROFIT AND TAXE PROF

As we know profit as shown in accounts differs the p

calculated as per income-tax act. The reasons for
difference between
two profits are of two types.

1-Timing difference

2-Permanent difference

TRANSITIONAL PROVISION
When this accounting standard of taxes on income is
time
applied ,the amount of differed tax asset/liability sho
be
created in the same way Had this accounting standa
been 9
LESOUR

eak-up of differed tax asset /liability should be disclos

e of differed tax asset arising out of unabsorbed depre

s ,evidence Supporting recognition should be disclose

ed tax/asset liability should be disclosed separately fr

nt asset /liabilities. They should also be distinguished
ce tax/tax provision/tax refund due.

ed tax asset and liability should be set off if permissib

the tax laws but to be shown separately if not permis

10
PROBLEM
From the following details of X ltd. for the year ended 31-
03-2007,calculate the differed
Tax asset/liability as per AS-22

Accounting profit 5,00,000

Book profit per MAT 4,50,000
Profit as per income tax act 50,000
Tax rate 30%
MAT rate 7.5%

Solution
Tax per accounting profit
5,00,000*30%=1,50,000
Tax as per income tax ,profit
50,000*30% =15000
Tax as per MAT
4,50,000*7.5%=33,750
Tax expanse =current tax +differed tax
11
1,50,000 = 15,000 + differed tax
Amount of tax to be debited in profit and loss acco
for
the year31-03-2007

Current tax +differed tax liability +excess of MAT

current tax
=15,000 + 1,35,000 +18,750
=1,68,750

12
ACCOUNTING FOR INVESTMENTS IN ASSOCIATES
IN CONSOLIDATED FINANCIAL STATEMENTS (AS-23)

OBJECTIVE-
The accounting was formulated with the objective
to set out the Principle and procedures for recognizing
the investment in associates In the consolidated financial
statements on the financial position of the group
Is indicated.

APPLICABILITY-
This accounting standered is applicable for investment in
associates when the investor prepares consolidated
financial statement ,the accounting slandered has
no applicability .

13
WHAT IS AN ASSOCIATE—
An associate is an enterprise in which the investor
has significant Influence and which is neither a
subsidiary nor a joint venture of the Investor.(AS-18)

ACCOUNTING FOR INVESTMENTS IN ASSOCIATES

Investment in associates should be accounted for per
equity method in consolidated financial statement if
the investor is required To prepare consolidated
financial statement .

CONTINGENCIES-In the financial statement of

investor following facts should be disclosed
A-Its share of the contingencies and capital
commitments of an associates for Which it s also
contingently liable.
B-those contingencies that arise because the investor
is severallyLiable for the liabilities of the associates . 14
DISCLOSUR ES-

Investor should disclose in its consolidated

financial statement the following—

1-Discription of associates including the proportion of

ownership interest should be disclosed.

2-Inestment in associates accounted for using the

equity method should be classified as long term
investments.
3-Difference in reporting dates of financial
statements of associates And of the investor should
be disclosed.

15
PROBLEM—
Brainsoft ltd.acquire 40% of AD Softex Ltd.’s shares on
April 2,2001 The price paid was Rs. 140,000.ADSofte
ltd.shareholders equity Shares are as follows

Equity Shares (paid up) 50.000

Share premium 1,50,000
Retained earning 50,000
---------------
2,50,000
Further AD Softex reported a net income of Rs. 30,000and paid
Dividends of RS. 10,000 . Brainshoft Ltd. Has subsidiary of
31.03.2002.Calculate the investment in AD Softex should
be shown in the consolidated Balance sheetof brainshoft Ltd.
As on 31.03.2002.

16
SOLUTION—

Asper AS-23 when the investor company prepares the

Consolidated Balance sheet,the investment in associate
i.e.AD Softex limited shall be carried by equity method and
goodwill and capital reserve to be identified and disclosed .
Extract of Consolidated Balance sheet of Braibshoft
ltd.as on 31.03.2002—
LIABILITIES ASSETS
investment in AD Softex limited
aassociates 1,08,000
Goodwill 40,000
(identified) ------------------
1,48,000
------------------
Value of the investment as per equity method
1,40,000+40%(3000)-40%10,000=1,48,000
Goodwill identified =(1,40,000-40%of2,50,000)=40,000 17
DISCOUNTING OPERATIONS (AS-24)

OBJECTIVE-
This standard covers “discounting operations” rather than
“discontinued operations” .The focus of the disclosure of the
information is about the operations which the enterprise
planes to discontinue rather than disclosing about the
operation which are already discontinued. However ,the
disclosure about discontinued operation Is also covered by
this standard.

WHAT IS DISCONTINUING OPERATION-

1- a) It is a component of an enterprise –
Disposing of substantially in its entirety such as selling the
component in a single Transaction or by demerger or spin
off of ownership of the component to the enterprise’s
Shareholders Or…..
18
 (b) Terminating through abondonment and

2-That represent separate major line of business or

geographical area of operation and
3-That can be distinguished operationally and for
financial reporting purpose

Some example—
Gradual phasing out of product line or class of service
Shifting of some production or marketing activities for
particular line of business from one location to an other.

Closing of facility to achieve productivity ,empowerments or

other cost saving.

19
PRESENTATION & DISCLOSURE

Description of the discontinuing operation

Business or geographical segments in which it is reported

Date and nature of initial disclosure event

Timing of expected completion of discontinuance

Carrying amount of total assets and liabilities to be

disposed of
Amount of revenue and expanse attributable to discontinuing
Operation.
Amount of pre tax profit or loss and tax expanse attributable to
discontinuing operation
Net cash flows attributable to the operating ,investing and
financing activities of the discontinuing operation. 20
OTHER DISCLOSURE

1-Amount of gain or loss recognized on the disposal of

Assets or settlement of liabilities and related income tax.

Net selling prices from the sale of those net assets for
which the enterprise has entered into binding sale agreements
and the expected Timing there of and carrying amount
of those assets.

MANNER OF DISCLOSURE-
The disclosure of amount of pre tax profit or loss and tax
expanse and amount of gain /loss recognized on the
disposal of assets and settlement of liabilities should be
disclosed in the notes to account.

21
INTERIM FINANCIAL REPORTS

Interim financial reports should disclose in its

notes any significant activity or event since the end
of the most resent annual reporting relating to
discontinuing operation and any significant change
in the amount of timing of cash flows relating to
assets and liabilities to be disposed /settled.

22
23