Currently, only clause 32 of the listing agreement mandates listed companies to publish CFS. Neither the existing Companies Act, 1956 nor AS 21 requires other companies to prepare CFS. Under the Companies Act, 2013, a company with one or more subsidiaries will, in addition to Standalone Financial Statement, prepare Consolidated Financial Statement.
For this requirement, the word “subsidiary” includes associate company and joint venture.
Schedule III of the Companies Act, 2013, which lays down the format for preparation of financial statements, contains the following general instructions for preparation of CFS
Impact of Companies Act, 2013 on preparation of consolidation of Accounts;
- All companies, including unlisted and private companies, with subsidiaries will need to prepare CFS. They need to gear up their financial reporting process for the same.
- For all companies, CFS should comply with notified AS. This will impact companies that are currently preparing CFS only according to IFRS, based on option given in the listing agreement (SEBI discussion paper on clause 41 proposes to remove this option). Those companies will have to mandatorily prepare Indian GAAP CFS, and may choose to continue preparing IFRS CFS on a voluntary basis or stop preparing the same.