Consolidation of accounts of Section 8 companies- whether a correct practice?
– Vallari Dubey | corplaw@vinodkothari.com
Intent of Consolidation
Consolidation is a combined representation of financials of a company and its subsidiaries, joint ventures and associates. Consolidated Financial Statements (‘CFS’) reflect the aggregate wealth of the holding company. Section 129(3) of the Act, 2013 mandates the preparation of CFS in addition to Standalone Financial Statements (‘SFS’), in case where the company has one or more subsidiaries.
In case of a not-for-profit organization, the need for consolidation does not arise. However, when such organization is registered under Section 8 of the Companies Act, 2013 (‘Act’), and by virtue of an interest in it by some company, the organization becomes a subsidiary of the other company, the question of consolidation arises. With the help of this article, we try and analyze the matter in question.