If A Ltd controls X Ltd, but is acting as an agent for B Ltd in...

If A Ltd controls X Ltd, but is acting as an agent for B Ltd in relation to its dealings with X Ltd, would A Ltd be required to include X Ltd’s accounts within its consolidated financial statements?

Expert Solution

Solution : Yes, A parent who controls one or more entities is required to present consolidated financial statements.

However, a parent is not required to present consolidated financial statements if it meets all of the following conditions.

Condition 1:The parent is either a wholly owned subsidiary or a partly owned subsidiary of another entity. Further its other owners have been informed and do not a=object, to the parent not presenting the consolidated financial statements.

Condition 2:The equity instruments or the debt instruments of the parent are not traded in a public market. The public market could be a domestic or foreign stock exchange or an over the counter market including local and regional markets.

Condition 3 : The parent has neither filed nor is in the process of filing, its financial statements with the securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market.

Condition 4 : The ultimate or any intermediate parent, of the parent, produces financial statements that are available for public use and comply with Ind AS, in which subsidiary are consolidated or are measured at fair value through profit or loss.

Conclusion : In the given case since A.ltd controls X.ltd no other conditions are satisfied A.ltd would required to include X.ltd accounts within its consolidated financial statements, mare fact that X.ltd is pure agent of B.ltd do not raise any exemption to A.ltd to exclude from consolidation.

ekkarill92 answered 2 years ago

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