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IND-AS Practice Points:

Consolidation Exception

Introduction
1. Indian Accounting Standards (IND-AS) have a radically different
approach to the concept of “control” in comparison with AS based
Indian Generally Accepted Accounting Principles (IGAAP). The
concept of control is at the heart of determining parent-subsidiary
relationship for the purpose of preparation and presentation of
consolidated financial statements. If control exists over another
entity, consolidation is a prerequisite. However, an exception to the
requirement of consolidation accounting exists where the parent
reporting entity itself is an “investment entity”.

Evaluation of status of an investment entity requires application of VINAYAK PAI V.
high degree of judgment under the IND-AS framework. Corporate CA, CMA
financial controllers and auditors have their task cut out in this
accounting aspect. IND-AS 109 would be the operating standard and
not IND-AS 110 in such circumstances!
Background

2. Indian companies in the second phase of IND-AS convergence
switch over from the prevailing AS based accounting framework to
the IND-AS framework from the current fiscal year ending March
31, 2018 with a requirement to prepare an opening IND-AS balance
sheet as of April 1, 2016.

IND-AS is based on International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB). IFRS
are continuously evolving and changes to a number of standards
and an overhaul of the Conceptual Framework are expected in the
days to come.

Investment Entity Concept Under IND-AS
3. Under IND-AS, an investment entity is an entity that:

u Obtains funds from one or more investors for the purpose of
providing those investors with investment management services,

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