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Mind The GAAP2: Consolidation

Published on Tue, Jul 21,2015 | 17:23, Updated at Wed, Jul 29 at 18:04Source : CNBC-TV18 |   Watch Video :

This single accounting standard can determine whether Indian business groups are about to get bigger or smaller. On the second episode of Mind The GAAP we examine the new Indian Accounting Standard  (IND-AS 110) on CONSOLIDATION. In english that means which entity is or is not part of the business group. On this discussion joining CNBC TV18’s Menaka Doshi are VS Parthasarathy, Group CFO & Group CIO - M&M, Sai Venkateshwaran, Partner & Head, Accounting Advisory Services – KPMG and Sumit Seth, Partner & IFRS leader – Price Waterhouse

It’s a shift from rule based to principle based accounting – that relies more on substance than form. Currently owning more than half the voting rights or control over the board of directors amounts to control. But IND-AS 110 defines control as power over an investee and exposure or rights to variable returns from involvement with the investee and the ability to use its power over the investee to affect returns.

Control Test

Indian GAAP
50% voting power
Control over Board compositions

Power over the investee
Exposure or rights to variable returns from involvement with investee
Ability to use power over investee to influence returns

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