1
1.
Consolidated Financial Statement Means
y
y
y
y
y
2.
Consolidated Balance Sheet
Consolidated Profit & Loss
Consolidated Cash Flow Statement
Consolidated Statement of Change in Equity
Additional Information in Consolidated Financial Statement (Subsidiary, Associated & Joint Ventures).
Mandatory Consolidation
Each and Every Company having Subsidiary company other than temporary subsidiary is required to
present consolidated account.
3.
Subsidiary Company :
Subsidiary means a company having holding company.
4.
Holding Company : It means
y
y
Company having power to control the composition of Board of directors.
Or
Holds more than ½ of total Share Capital (Equity & Convertible Preference Shares) either alone or with
another subsidiary.
X Ltd. is Holding
80% Shares
X Ltd.
30%
¾ Y Ltd.
10%
30%
20%
5.
¾
¾
Notes :
¾
40% Shares
¾
¾
Z Ltd.
K Ltd.
If one company controls the BOD & another company has more than ½ of the total share capital then,
both of the companies are treated as Holding Company.
Majority Interest : Share of Holding Company (suppose X Ltd. hold 60% of the equity shares of Y Ltd. in that
case share of X Ltd. and Y Ltd. is treated as majority interest).
6.
Minority Interest : Share of other than Holding Company (In above example share other than X Ltd. i.e.40% is
treated as minority interest).
7.
Rule of Consolidation under AS - 21 :
Consolidation is required 100% of Assets & Liabilities in the books of holding company, and excess consolidated
Assets & Liabilities should be disclosed as Minority Interest.
8.
Cost of Control :
(a)
(b)
Cost of control is calculated on the date of purchase of shares (Date of Acquisition).
Cost of control is calculated by comparing Cost of Investment and Share in Net Assets. (i.e. Shares Capital
and Reserves & Surplus).
2
Goodwill if A is > B (A - B)
Capital Reserve if B > A (B - A)
Format :
Particulars
A. Cost of Investment
Amount invested (Actual invesment in Equity & Preference)
Less : Pre-acquisition Dividend of Equity & Pref.
B. Share in Net Assets Represented by
Share Capital Equity & Preference (Opening + Bonus (if any)
Capital Profit
C. Goodwill (A - B)
D. Capital Reserve (B - A)
Rs.
xxxx
(xxx)
xxxx
xxxx
xxxx
xxxx
xxxx
xxxx
Important Point :
z
When “Cost of investment” and “Carrying amount” is different then consider “Carrying Amount”.
z
For calculation of cost of control, when capital profit is determined then, for application of time adjustment Even
Profit is required.
z
Even profit is calculated after adjusting un-even items, (Abnormal Loss & Gain, Dividend paid & Proposed,
Dividend Tax, Bonds Shares and Other appropriations).
z
For determination of capital profit analysis of Profit is required.
z
Analysis is made for Profit & Loss all types of Reserve & all Fictitious.
z
No Analysis is required for Equity Share Capital and Preference Share Capital as they are Capital by Nature.
(even though issued Date of Acquisition).
z
Even though Share Capital is issued out of post profit i.e. Bonus Shares analysis into capital and revenue is not
required.
9.
Minority Interest
Â
Origination : Minority interest is arising due to 100% Consolidation method prescribed by AS - 21.
Â
Meaning : Excess of Net Assets consolidated on the date of Acquisition in holding company.
Â
Format of Minority Shares
Particulars
Share in Equity Share Capital
Shares in Preference Share Capital
Share in Revenue Reserve & Revenue Profit
Share in Capital Profit
Less : Share in Stock Reserve (in Upstream transaction)
Less : Share in Equity proposed Dividend
Total Balance for Balance Sheet
Â
Amount
xxxx
xxxx
xxxx
xxxx
(xxx)
(xxx)
xxxx
Presentation of Minority Interest in Consolidation Balance Sheet :
Particulars
I.
Equity & Liabilities
(a) Shareholders Fund
(i) Equity Share Capital
(ii) Reserves & Surplus
(iii) Share Warrants (if any)
(iv) Minority Interest
(b) Non-current Liabilities
Amount
xxx
xxx
xxx
xxx
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10.
Negative Minority Interest
When Minority Interest due to losses of Subsidiary is “Negative” in that situation negative amount is adjusted
from Holding Company Reserves.
In subsequent years when subsidiary earns profit in that case prior adjustment of loss against holding company
transferred to holding company as profit and balance treated as minor interest.
Note : When Minor has binding obligation (Partly paid shares held by outsider or any other binding obligation in
writing) then negative minority interest can be presented.
11.
12.
Analysis of Profit, Reserve and Fictitious of Subsidiary Company
9
Analysis of Profit is required when Date of Acquisition & Date of Consolidation is “Different”.
9
Profit on Date of Acquisition is either given in question or calculated using time adjustment.
9
If Ques. is silent assume profit from current year and Reserve and Fictitious from Past period.
9
Time adjustment is applied on even profit except Abnormal Loss & Abnormal Gain.
9
Profit from Balance Sheet is appropriated Profit & accordingly for determination of PAT all journalised
appropriations are added back.
9
After applying time adjustment appropriation are deducted from Pre & Post as per its “Source of
Appropriation”.
Dividend from Subsidiary Company (Sec. 123 of Companies Act, 2013)
y
Dividend is paid out of Profit.
y
Profit may be of “Current FY” or any “Previous FY”.
y
It means dividend is first paid out of “Current Year Profits” and then “moving backwards”.
y
Since Dividend is distributed out of profit hence, it is required to classify the dividend into pre-acquisition
and post-acquisition dividend.
y
Dividend paid out of profit earned before the date of acquisition is classified as “Pre-acquisition
Dividend”.
y
Dividend paid out of profit earned after the DOA is classified as “Post acquisition Dividend”.
y
Pre-acquisition dividend is “Deducted from cost of Investment” at the time of Purchase of Investment,
because at the time of purchase the profit from which such dividend is paid has been charged by subsidiary
from holding as cost.
y
Post Dividend is paid out of that profit which has been earned from the investment made by holding
company, thus such dividend is an investment income, and accordingly transferred to P&L.
y
Interim dividend is paid out of current year profit up to the date of declaration.
y
Such Interim Dividend may be Pre or Post depends upon the DOA.
Summary of Adjustment in the books of Subsidiary
Step 1 :
Step 2 :
Step 3 :
In Analysis of Profit “Add Dividend”.
Apply Time Adjustment (if any)
Deduct from its source
(i)
Final - From profit of the year for which dividend is paid and moving backward.
(ii) Interim - Current year profit up-to the date of declaration.
Summary of Adjustment in the books of Holding
(i)
Check where
1.
Dividend from subsidiary has been received.
2.
Such Dividend relates to Pre-Acquisition Period.
3.
Holding Company has credited that dividend to the Profit & Loss A/c.
(ii) If all the above condition are satisfied then Pass following Journal
Consolidated P&L A/c
Dr.
xxx
To Investment A/c
xxx
4
13.
Revaluation of Fixed Assets of Subsidiary
Step 1 : Calculate Revaluation Profit or Loss (on date of Acquisition)
Particulars
Market Value on Date of Acquisition
Less : Book value on the Date of Acquisition
Revaluation Profit (Loss) (always transferred to capital column of AOP)
Amount
xxx
(xx)
xxx
Step 2 : Calculate Additional or Savings in Depreciation
Particulars
Amount
(1) Depreciation on market value for Post Period
xxx
(2) Less : Depreciation already charged on Book Value
(xxx)
Balance to be transferred to Analysis of Profit (transferred to revenue column of AOP) (xxx)
Note : Impact of revaluation is always considered after time adjustment in AOP.
14.
Contra Items
1.
Elimination of Common Receivables & Payables (Debtors, Creditors, BR, BP, Loan Receivables & Payable)
Journal Entry (only imapct is to shown)
Creditros / BP / Loan Payable Account
Dr.
Cash in Transit
Dr.
To Debtors / BR / Loan Receivable
Notes : If payable is more than receivable then eliminate the minimum common amount.
z
2.
15.
Inter-Company Debentures
z
Investor is Holding Company
Debenture Liability
Dr.
Consolidated P&L (bal. fig.)
Dr.
To Investment in Debentures (Actual Cost)
To Consolidated P&L (bal. fig.)
z
Investor is Subsidiary Company
Debenture Liability
Dr.
Analysis of Profit (Bal. fig.)
Dr.
To Investment in Debentures
To Analysis of Profit (bal. fig.)
Notes : Profit is of revenue nature and transferred to Post Period of Analysis of Profit.
Stock Reserve
A.
Down Stream Transaction (means when Holding company “Sale” the Goods to Subsidiary).
Step 1 : Calculate unrealized Profit in Stock
Step 2 : Deduct Such Stock Reserve from consolidated Profit & Loss
Step 3 : Deduct Stock in consolidated Balance Sheet.
B.
Up Stream Transaction (means when Holding company “Purchases” from Subsidiary).
Step 1 : Calculate unrealized Profit in stock
Step 2 : Distribute unrealized profit as follows :
(i)
Related to Holding Company --- Deduct from Consolidated Profit & Loss.
(ii)
Related to Minority Interest --- Deduct from Minority Interest.
Step 3 : Deduct Stock in consolidated Balance Sheet.
Note : Apply similar treatment for unrealized profit/loss on assets transferred.
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16.
Contingent Liabilties
Step 1 :
Step 2 :
Step 3 :
17.
Identify Total bill issued within the group.
Identify and eliminate Bills Receivable & Bills Payable by bill issued within the group and not discounted.
Identify and reduce contingent liability if any by bill issued within the group and discounted.
Error or omission must be rectified before all the adjustments
(i.e. if any entry needs to be credited to P&L and not credited then first do that entry and then any adjustment is done).
18.
Equity Proposed Dividend of Holding Company
If Journalised ............................... “Ignore”
If not Journalised then Impact to be Shown
Consolidated P&L
Dr.
To Proposed Dividend
Note : Amount of Proposed Dividend is presented in consolidated Balance Sheet as “Short Term Provisions”.
19.
Equity Proposed dividend of Subsidiary Company
y
If Dividend has been Journalised then cancel such dividend in “Analysis Profit” before time adjustment. If
not journalised then no treatment is required in AOP.
y
Impact on Minority Interest
Minority Interest
Dr.
To Minority in Equity Proposed
Note : Minority interest in proposed dividend is presented consolidated Balance sheet as “Short Term Provisions”.
20.
Bonus Shares of Subsidiary Company
A.
No Treatment is required in the books of Holding Company for Dividend received from Subsidiary
but calculation of Holding Ratio must be taken care off :
No. of Share Purchased + Bonus Received
Formula 1 : Cum-Bonus Method =
No. of Share of Subsidiary + Bonus Issued
No. of Share Purchased
Formula 2 : Ex-Bonus Method =
B.
No. of Share of Subsidiary before Bonus
Books of Subsidiary Company
1. If Bonus is Journalised
Step 1 : Add Bonus in Profit from which it has been deducted.
Step 2 : Apply Time Adjustment (if any).
Step 3 : Deduct Bonus from its Source.
2.
If Bonus has not been journalised
Deduct Bonus out of its “Source” after time adjustment.
While calculating “Cost of Control” and “Minority Interest” Bonus shares must be considered
Note : Always deduct bonus from pre-profit except when pre-profit is insufficient.
6
21.
Foreign Subsidiary Sec.2(42) of Companies Act, 2013
Step 1 : Prepare analysis of Profit in Foreign Currency, but don’t distribute profits.
Step 2 : Apply following rule of conversion
ITEMS
RATE
1.
Fixed Assets
at Actual rate
2.
Capital Profit
at earlier rate / opening rate
3.
Revenue Profit
at Average Rate
4.
Other Assets and Liabilities
Use Closing Rate.
Step 3 : Other steps of consolidation are same (i.e.Cost of Control, Minority Interest, Consolidation P&L).
Notes :
1.
Dividend received from subsidiary company by holding company is converted using rate on the “Date of
Dividend received”.
2.
Difference arises due to conversion of Balance Sheet is treated as exchange difference and “distributed
between holding and Minority as Post Profit”.
22.
Different Accounting Period
1.
Under companies act, 2013, all companies are required to follow 1st April to 31st March as accounting year,
but if company is foreign then different dates are permitted.
2.
AS 21 requires that for consolidation purpose 6 months gap is valid.
3.
“For exam purpose” Accounts to be consolidation of both Holding & Subsidiary must be on the same date.
4.
For this purpose Accounts of Subsidiary must be updated.
5.
For updation of Account of Subsidiary following steps are applied :
Case 1 :
When there is normal Business Operations :
Step 1 : Calculate profit Up-to “Updation date”
Step 2 : Fixed Assets are presented after deducting depreciation & other Assets and Liabilities are assumed at Same Value.
Step 3 : Difference in Balance Sheet is treated as Cash (if Dr.) & “Overdraft” (if cr.)
Step 4 : Other steps of consolidation are same.
Case 2 :
If there is change in the value of Assets and Liabilities
Step 1 : Prepare Ledger A/c in Column form for each item.
Particulars
Opening Balance
Add : Additions
Less : Deletion
Closing Balance
Assets
xxx
xxx
(xx)
xxx
Liabilities
xxx
xxx
(xx)
xxx
Reserve
xxx
xxx
(xx)
xxx
Profit
xxx
xxx
(xx)
xxx
Capital
xxx
xxx
(xx)
xxx
Step 2 : Other Steps of consolidation are same.
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23.
Preference Proposed Dividend :
1. Subsidiary
¾
¾
If Dividend Proposed & Journalized
Step 1 :
Add in Profit from which dividend has
been deducted
Step 2 :
Apply time Adjustment if any.
Step 3 :
Deduct dividend from its “Source”
If Dividend Not Journalized
¾
¾
If Proposed
If Not Proposed
“Deduct after time adjustment from its Source”
¾
¾
2.
Cumulative Preference Shares
“Deduct after time adjustment from its
Source”
Non-Cumulative PSC
“Ignore”
Treatment of Preference Proposed Dividend for Consolidated Balance Sheet
¾
¾
From Pre-Profit
From Post Profit
¾
¾
¾
Minority Share
“Transferred to Cost
of Control”
Transferred to BS in
“Short Term Provisions”
¾
¾
24.
Share of Holding
Share of Holding Added in CPL
Share of Minor transferred to
Consolidated BS in
“Short Term Provisions”
Different Date of Acquisition
1.
If Investment is made on different dates then Profit of Subsidiary is “Divided” between Pre & Post on the
basis of “Step by Step Acquisition” method.
2.
Step by Step Acquisition Method :
Step 1 : Prepare separate AOP for each acquisition (assume each acquistiion as separate Question).
Step 2 : Minority Interest is calculated on “last acquisition only”.
Step 3 : If small investments are made at different dates then last acquisition is treated as “Date of Acquisition”.
8
Multiple Subsidiary
Â
Simple Subsidiary (each subsidiary is a direct holding)
75%
Holding
Company
¾
S1
80%
¾
S2
Following steps are applied :
Step 1 : Prepare AOP for each subsidiary separately.
Step 2 : Prepare cost of control in column form.
Step 3 : Prepare minority interest in column form.
Step 4 : Prepare consolidated Balance Sheet of each Subsidiary together.
Chain Subsidiary :
75%
Holding
Company
¾
80%
Sun Ltd.
¾
S1
¾
S2
Moon
Ltd.
30%
60%
¾
80%
Sun Ltd.
70%
Light
Ltd.
¾
Moon
Ltd.
60%
¾
10%
¾
¾
Night
Ltd.
¾
20%
15%
¾
Â
¾
25.
Light
Ltd.
Following Steps are Applied
Step 1 : Identify lower subsidiary and analyze the profit of subsidiary.
Step 2 : Analyze Profit of upper subsidiary and “before distribution of profit” consider only revene profit
and reserve transferred from lower subsidiary.
[DO NOT CONSIDER CAPITAL PROFIT, because it is directly transferred to cost of control]
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Step 3 : Prepare cost of control in column form for each component separately (component means for
each Share Holding).
Step 4 : Calculate Minority Interest in Column Form.
Step 5 : Prepare Consolidated Balance Sheet.
Â
Multiple Subsidiary with Multiple Holding (Very Easy)
Case 1 :
Holding Ltd.
Year 2005
Year 2006
75%
¾
y
1.1.05
y
1.8.05
PL(800)
10%
80%
¾
y
1.1.05
1.8.05
PL 1920
1.09.06
¾
1.12.06
B Ltd.
y
C Ltd.
Case 2 :
Holding Ltd.
75%
80%
1.4.01
¾
¾
y
1.1.01
Year 2001
1.11.01
y
B Ltd.
10%
1.4.01
¾
¾
y
1.1.01
1.9.01
y
C Ltd.
Conclusion :
1.
If investment of Holding Company in upper subsidiary is before upper subsidiary investment in lower subsidiary, then
Revenue Profit i “Not Divided” between Pre & Post. (For reference see E.g. 15, Ph. 16).
2.
If Holding Company investment in upper Subsidiary is after upper subsidiary investment in lower subsidiary,
then Revenue Profit (when Lower subsi. Profit trf. To upper Subsi.) is “Divided” in Pre & Post in the ratio of
time. (For reference see Eg. 16 Pg. 16).
10
26.
Disposal of Shares
1.
2.
3.
“No Treatment” is required in the books of Subsidiary company.
Holding must be revised after disposal of shares.
When consolidated A/c is prepared from individual a/c in that case treatment of disposal is made with
respect to “AS - 13”.
Calculation of Profit / Loss on Disposal (AS - 13)
Particulars
Amount
Sale Consideration
xxxx
Less : Cost of Investment
(xxx)
(Original Cost - Pre. Dividend)
Profit / (Loss)
xxxx
Note : If holding company has correctly apply AS - 13 then ignore, if not then rectification is needed.
4.
Calculation of Profit in consolidation financial statement (AS - 21)
Particulars
Sale Consideration
Less : Share of Net Asset on Date of Disposal
Less : Goodwill
Add : Capital Reserve
5.
27.
Rs.
xxx
(xx)
Amount
xxx
(xx)
xxx
xxx
If disposal is on proportionate basis then each item is proportionately adjusted (except sale consideration).
Cross Holding
Step 1 :
Analysis of profit of Holding and subsidiary, with reference to DOA by holding in Subsidiary, (but do not
divide profits)
Step 2 :
Apply simultaneous equation.
Step 3 :
Transfer share of subsi. In holding “to subsidiary AOP” then divide profit of subsidiary into pre & post,
but do not transfer such profit to holding, because pre profit is transferred to cost of control & post profit
to Reserve and Surplus.
28.
Step 4 :
Cancel investment of subsidiary in holding while calculating cost of control.
Step 5 :
In consolidated Balance Sheet share capital of Holding company is reduced by inter-company cancellation.
Consolidated Profit & Loss A/c
1.
Preparation of consolidated P&L is just addition of Income & Expenses of Holding & Subsidiary.
2.
If there are any common Income or expense then it must be eliminated in cosolidated P&L.
3.
Format of Consolidated P&L
Particulars
Revenue form Operations
Other Income
Total Revenue (I + II)
Expenses
Consumption of Raw Material
Purchase of Stock in Trade
Change in Stock of WIP & finished goods
Employee Benefit Expenses
Finance Expenses
I.
II.
III.
IV.
Notes
Amount
xxxx
xxxx
xxxx
xxxx
xxxx
xxxx
xxxx
xxxx
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Depreciation and amortization
Other Expenses
Total Expenses
V.
Profit before Tax (III - IV)
VI. Tax Expenses
Current year
Deferred
VII. PAT from continuing Operations (V - VI)
Opening Balance
Total profit for appropriation
Stock Reserve
Preference Dividend
Proposed Eq. Dividend of Holding
Minority interest in Equity Propose in Subsidiary
Cost of Control
Share of Pre-dividend from subsidiary
Minority interest in Interim dividend
Minority interest in Dividend Paid (Post)
Transfer to Consolidated Balance Sheet
4.
29.
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxxx
xxxx
xxxx
xxxx
(xxxx)
xxxx
Tax expense is not calculated on consolidated basis, instead they are clubbed in consolidated BS
Consolidated Cash Flow Statement
1.
2.
3.
30.
xxxx
xxxx
xxxx
xxxx
Consolidated Cash Flow Statement is presented as per the requirement of AS - 3.
Format of Consolidated Cash Flow Statement is same as in case of AS - 3.
While consolidating cash flow intercompany cash flow are eliminated, by preparing working notes.
Consolidated Statement of Change in Equity)
y
y
In this statement reconciliation is made for parent portion of Equity from beginning to end, and Minority
Interest..
Format of Statement of Change in Equity
Particulars
Holding
Minority
Opening Balance
xxx
xxx
Additions :
Profit Earned
xxx
xxx
Share in Subsidiary
xxx
---Increase in % of Holding
xxx
---Decrease in % of Holding
---xxx
Deletions :
Dividend paid
(xx)
---Proposed dividend
(xx)
---Increase in % of Holding
---(xx)
Decrease in % of Holding
(xx)
---Closing Balance
xxx
xxx
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31.
Miscellanous Point under AS 21
1.
2.
3.
32
Short term Investment (creates Control)
In following case consolidation is Not Required :
(i)
When, shares are purchases with objective of “Short-term” disposal for earning Profit.
(ii) Where there is restriction (long term) on transfer of funds to “Holding”.
Two Holding Companies :
(i)
One controls composition of BOD
(ii) Another control the half of share capital
“In that cse consolidate subsidiary in both books”.
Consideration of convertible Preference Share Capital for purpose of control.
Associates AS - 23
(According for Investment in Associates in Consolidation Financial Statement)
A.
Applicability
%
1.
2.
3.
4.
B.
C.
D.
Up to 24%
20% to 50%
More than 50%
Joint Control
Conso. Financial
Statement
AS - 13
AS - 23
AS - 21
AS - 27
Individual FS
AS - 13
AS - 13
AS - 13
AS - 13
Significant Influence
(i) When one company has 20% of the share capital of another but, not exceeding 50%.
OR
(ii) Has power to influence directors of another company.
Note : Equity Share capital + Preference Share Capital.
In consolidated FS Investor (Holding), should A/c Investment on Equity Method, (means investment on
revalued figure).
Application of Equity Method :
Step 1 :
Calculate Goodwill / Capital Reserve on the Date of Investment. (Same as AS - 21).
Step 2 :
Goodwill / Capital Reserve is not disclosed separately but included with value of Investment.
(amount is presented with in “()” ).
Step 3 :
Investment is Increased by Share of Net Assets after acquisition (Post profit reserve), and
decreased by Post Loss.
In case investment cannot be less than 0”.
Step 4 :
Investment is also increased by “Revaluation Reserve” created “after DOA” or and “Foreign
Exchange Gain”.
Step 5 :
Unrealized profit and loss are eliminated from value of Investment to the extent Investor Share.
Step 6 :
Presentation of Investment
Particulars
Amount
Cost of Investment (including Goodwill / CR)
xxxx
Share in Post Profit after preference dividend of Investee
xxxx
Pre-dividend received
(xxx)
Post - Dividend received
(xxx)
Proporationate Stock Reserve
(xxx)
Total Revalued Investment
(xxx)
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13
Step 7 :
Step 8 :
Step 9 :
33.
If Associates has outstanding cumulative preference share capital then preference dividend
must be deducted from Associates Profit.
No treatment is required for Equity Proposed Dividend of Associates.
If Entry has been journalized then it must be reversed.
Equity Method is not applied if Investment is :
1.
Investment is temorarily.
3.
There is long term vesting restrictions on transfer of Funds.
Note 1 : Assets and Liabilities of Associates are Not Consolidated.
Note 2 : Only Investment is revalued and counter is made with reserves.
Joint Venture
1.
Meaning : It means contractual arrangements between 2 or more persons / companies / enterprises etc. To
carry-out some economic activity which is subject to joint control.
2.
Types of Joint Venture :
(a) Jointly controlled operations
(b) Jointly controlled Assets
(c) Jointly control Entity.
3.
Jointly Controlled Operations :
Meaning : In this method no separate entity is created, operation is conducted on combined basis by each
independent co-venture. Ratio of Profit Sharing Agreed.
4.
Accounting of Such Joint Venture :
Step 1 :
Prepare consolidated Profit & Loss Account.
Step 2 :
In the Books of each co-venture prepare joint venture account.
Jointly Controlled Assets :
Meaning : In this method no separate entity is created each co-venture investment in the Assets and
recorded share in following :
In Individual Statement
(i)
Share in Jointly controlled Assets
(ii) Expenses incurred in jointly controlled assets.
(iii) Share in Loan taken
(iv) Individual loan taken for purchase of assets.
(v) Share in recovery from Assets (e.g. Sale of Scrap, rent etc.)
(vi) Share in Depreciation.
Following steps are applied :
Step 1 : Prepare a Memorandum consolidated Balance Sheet for Assets.
Step 2 : In the Books of Each of co-venture prepare extract of P&L & Balance Sheet.
5.
Jointly controlled Entity
1.
Meaning : Separate entity is created for operations of joint venture.
2.
Account Procedure :
Co-venture cannot recognize share of expenses and income, Assets & Liabilities in Individual Statement.
Only share of Profit is Recognised.
Joint venture beig a separate entity prepare own Balance Sheet & P/L.
In case each co-venture has different proportion in assets, expenses & Incomes then division can be
made while preparing Profit & Loss and Balance Sheet.
14
Consolidation Procedure
Step 1 : Each co-venture should consolidated own share of Assets & Liabilities.
Step 2 : Analysis of Profit, cost of control is calculated same as in case of AS - 21.
Step 3 : Contra and Stock reserve are eliminated to the extent of venture share (proportionate)
Note : No minority itnerest arises.
3.
Disposal of Investment : If after disposal of investment control is more than 50%.
4.
Transsaction between venturer and joint venture
Venturer should not recognise own share of profit on any transaction of Purchase of Sale from Joint Venture.
5.
Operator
Payment of remuneration to operator is treated as expense for joint venture and recognise in Profit and Loss
account of Joint Venture.
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