1. Section 129 of the Companies Act states that consolidation of accounts have to be done with Subsidiaries and for the purpose of Section 129, subsidiaries includes Associates. Therefore, if you have Associate only, consolidation is required. Exemption was provided only for FY 2014-15.


  1. A notification dated 29.02.2016 has exempted consolidation in few cases and I am attaching the notification in this regard. The exemption is basically where one holding has many subsidiaries and associates and any one in the chain has prepared consolidation of accounts then upon certain formalities, other need not prepare the same.


  1. When subsidiary is consolidated than ‘Accounting Standard AS-21 : Consolidated Financial Statements ‘ is followed which requires line by line consolidation. This requires, adding of corresponding sundry debtor, sundry creditors and other items, unrealized gain on cross transactions are eliminated and goodwill/capital reserve is stated in books. But where an Associate is consolidated, the procedure is as follows:
  2. Calculate Goodwill/ (Capital Reserve) at the time of holding. The procedure will be :

Let us take imaginary figures:

(Rs. in lacs)

Cost of Invesment                                                                                —     100

Less:  % share of Paidup Capital of Associate                                   —-     80

% share in the Reserves and Surplus of Associate               —-      40


Goodwill, if +ve

Capital Reserve , if –ve               (20)


Suppose if share was acquired in 2014, then this will be calculated on that date

And share of Profit / (loss) earned by Associate after that date till 31.03.2016 shall be post acquisition profit.

Suppose post acquisition profit share is                                              10


  1. Suppose A Pvt. Ltd. has acquired 22% shares of Associate B Pvt. Ltd. and profit of associate is 20 lacs for FY 2015-16, then the share of profit of Associate for FY 2015-16 is 22% of 20 lac,i.e, 4.4 lac. This figure has to be included in the Statement of P & L a/c of A Ltd.


  1. In the Balance Sheet, in the Asset side show:

INVESTMENTS:                                                                                  Inner Col.              Outer Col.

Associate: B Pvt. Ltd.

Investment                                                                                              100

Add: Post-acquisition profit                                                                 10                          110


In the Liability side:


Profit & Loss Account:

Per last account:                                                         —–

For the year (includes 4.4 lac of Associate)            —–        ——-




Rs. 110/- is the carrying amount of investment. Goodwill / (Capital Reserve) has to be shown as follows:

S. No. Name of the Associates Ownership Interest (%) Original Cost of Investment Amount of Goodwill (Capital Reserve) in original Cost Share of Post Acquisition Reserves & Surplus Carrying Amount of Investment
(A) (B) ( C)  ( A + C)
1) B Pvt. Ltd. 22.00              100                                             (20)                                   10                              110



I hope that this information shall be useful. If anyone have querries than they are welcome to ask.

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