Indian Accounting Standards (Ind AS)

• Subsidiaries that are part of a group where the parent prepares consolidated financial statements under Ind AS must also adopt Ind AS.
  
• Ind AS is mandatory for companies with net worth above ₹250 crores or if they are part of a group meeting threshold criteria.
  
• Subsidiaries of foreign companies listed in India may also be required to comply with Ind AS.
  
• Ind AS provides uniform accounting principles aligned with IFRS (International Financial Reporting Standards).
  
• Subsidiaries must ensure consistency with the parent company’s reporting policies under group consolidation.
  

Companies (Accounting Standards) Rules, 2021

• If Ind AS is not applicable, the subsidiary must follow the Accounting Standards (AS) notified under the Companies Act, 2013.
  
• These apply to Small and Medium-Sized Companies (SMCs) and other unlisted private companies not covered under Ind AS.
  
• The standards include guidelines on revenue recognition, depreciation, employee benefits, and financial instruments.
  
• AS is simpler than Ind AS but lacks some advanced disclosures and fair value concepts.
  
• The applicability is based on listing status, turnover, and borrowing thresholds.
  

Consolidation and Group Reporting

• Subsidiaries whose parent companies prepare consolidated financial statements must provide consolidation-ready data.
  
• They must follow the same accounting framework (Ind AS or AS) as the parent for uniformity.
  
• Schedule III of the Companies Act must be followed for the format of financial statements.
  
• Subsidiaries must report intercompany transactions, balances, and eliminations transparently.
  
• Differences in reporting currency, if any, must be reconciled during group consolidation.
  

Audit and Disclosure Compliance

• Subsidiaries must prepare audited financial statements annually under their applicable accounting framework.
  
• Disclosures must comply with all relevant accounting standards, including notes on related party transactions, contingent liabilities, and deferred tax.
  
• Accounting policies must be disclosed clearly and consistently from year to year.
  
• Changes in accounting estimates or policies must be explained with impact analysis.
  
• Consolidated and standalone disclosures must both meet statutory reporting norms.
  

Tax and Regulatory Relevance

• Computation of taxable income for subsidiaries is often based on their statutory financials.
  
• Proper application of standards affects tax deductions, depreciation, and provisioning.
  
• Regulatory bodies like MCA, SEBI, and RBI monitor compliance through financial statement disclosures.
  
• Incorrect or non-compliant accounting may lead to audit qualifications or penalties.
  
• Transfer pricing documentation also depends on correctly prepared financials under applicable standards.