Whether holding company is required to consolidate its subsidiary which is LLP (Limited Liability Partnership) or a partnership firm?
Will the answer differ if LLP is an associate or Joint Venture (JV) of the holding company?
In accordance with rule 6 of Companies (Accounts) Rules, 2014, consolidation should be done in accordance with Schedule III of Companies Act, 2013 and applicable Accounting Standards.
Applicable Accounting Standards
Holding company should refer Ind AS 110, Consolidated Financial Statements if it’s required to comply with Ind AS. Ind AS 110 provides that if investor entity controls the investee entity, then it should consolidate the financial statement of investee entity. Here, the word ‘entity’ includes a company, firm, LLP or any other entity. Therefore, a firm or LLP is required to be consolidated.
In case the entity is required to adopt Accounting Standard then the holding company should refer AS 21, Consolidated Financial Statements.AS 21 provides that a subsidiary is an enterprise that is controlled by another enterprise. The term ‘enterprise’ includes a company, firm, LLP and any other enterprise. Therefore, under AS also subsidiary being LLP or firm required to be consolidated.
In both the cases, holding company has to consolidate its LLP or partnership firm. The answer will be same even if LLP or partnership firm is an associate or Joint Venture.
– Frequently Asked Questions (FAQs) regarding requirements to prepare Consolidated Financial Statements issued by ICAI