Consolidation Of Group Accounts Opposed By Industry Chambers
Apex industry chambers have opposed the provision for consolidation of accounts of group companies in the recast Companies Bill.
The move by the working committee on the bill to consolidate the accounts of subsidiary firms with the parent company, is aimed at bringing domestic corporate accounting standards in line with international norms.
In separate meetings with the working group, the three apex chambers - the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce & Industry (Ficci) and the Associated Chambers of Commerce and Industry (Assocham) - suggested that the provision should not be imposed on corporates for a period of at least five years.
If the working committee wants to include the provision, it must be made optional for three to five years, a chamber official said.
Assocham secretary-general V Raghuraman said: We have asked for a transitional period of 3-5 years during which the provision on consolidation of accounts must be optional on corporates rather than compulsory.
He said consolidation of accounts would help corporate houses present healthier balance sheets and give them greater leverage to borrow funds against a stronger fixed assets reserve.
However, he added that the provision should not be hastened as Indian industry is currently going through a period of restructuring with mergers, demeregers and division of family businesses.
There must be a holistic approach to consolidation.
For instance, the income tax act must contain provisions for group assessment.
It must also be made clear whether banks and financial institutions will consider the consolidated balance sheet for credit appraisal.
Ficci said it appreciated the committees view that accounting standards should be brought in conformity with international standards, but opined that the time is not ripe to introduce consolidation of accounts.
It should be made optional for the time being, Ficci said.
Ficci secretary (company law & legal affairs) S P Gupta said consolidation of accounts must be made applicable only on to those groups where the parent company has more than a 51 per cent stake in its subsidiary firms.
He said the provision will become relevant if the group tax assessment system is introduced in corporate law.
The CII has also suggested making the provision mandatory initially.