Consolidation procedure explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Consolidation turns the separate statements of a parent and its subsidiaries into one set, as if the group were a single entity. The mechanics are simple to state: add like items, remove the investment against the subsidiary's equity, remove everything the group owes itself, and show the outside shareholders' share separately.
Under Ind AS 110, paragraph B86, a parent combines like items line by line, eliminates its investment against its share of the subsidiary's equity (with goodwill under Ind AS 103), and eliminates in full intra-group balances, income, expenses and unrealised profits. Non-controlling interests are shown within equity, separately from the owners' equity (paragraph 22), and profit and total comprehensive income are attributed to them even if that leaves a deficit (B94). The subsidiary's figures are used on fair values at the acquisition date (B88).
Ind AS as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015). Amendments notified after 1 April 2025 are not reflected in this article; check mca.gov.in before applying it to a later period.
What the paragraphs require
| Paragraph | Requirement | What it means in practice |
|---|---|---|
| Ind AS 110, 19 and B87 | Uniform accounting policies; adjust a subsidiary that uses different ones | Align policies before combining |
| 20 | Consolidate from the date control starts to the date it ends | Part-year subsidiaries are included for that part only |
| B86(a) | Combine like items of assets, liabilities, equity, income, expenses and cash flows | Line by line, not a one-line investment |
| B86(b) | Offset the parent's investment against its portion of the subsidiary's equity | Ind AS 103 sets the goodwill |
| B86(c) | Eliminate intra-group items in full, including profits in inventory and fixed assets | Full elimination, whoever bears it |
| B88 | Income and expenses follow the fair values recognised at the acquisition date | Extra depreciation on fair value uplift |
| B92, B93 | Same reporting date; if impracticable, a gap of no more than three months | Adjust for significant events in the gap |
| 22, B94, B95 | NCI within equity; attribute profit and total comprehensive income, even to a deficit | Cumulative preference dividends are adjusted first |
| Ind AS 103, 19 | NCI measured at fair value or at the proportionate share of identifiable net assets | The choice is made for each combination |
| Ind AS 103, 32 | Goodwill is consideration plus NCI less identifiable net assets at fair value | The acquisition-date computation |
The steps
First, align reporting dates and policies (B87, B92, B93). Second, compute goodwill and NCI at the acquisition date: consideration plus NCI, less net identifiable assets at fair value (Ind AS 103, paragraph 32). Third, adjust the subsidiary's figures for fair value uplifts and the depreciation on them (B88). Fourth, split the subsidiary's post-acquisition equity between the group and the NCI. Fifth, eliminate intra-group balances, income and expenses. Sixth, eliminate unrealised profit in closing stock and assets, and allocate the elimination: a downstream sale, parent to subsidiary, falls wholly on the parent; an upstream sale, subsidiary to parent, is shared with the NCI because the profit sits in the subsidiary's results. Seventh, add the lines.
When a consolidated statement is required and how it is filed are covered in our post on when and how to prepare consolidated financial statements; control itself is tested under paragraphs 5 to 18, as set out in our guide to assessing control.
Group closings are tight, and a worksheet built the first time usually needs a second check. Our financial statement preparation team can review the working with your finance team.
Worked example
The entity and all figures in this example are invented for illustration. Amounts are in ₹ lakh. Deferred tax on the fair value uplift and on the unrealised profits is ignored for arithmetic only; see our guide to deferred tax under Ind AS 12 for how it is added.
Kosi Industries Limited bought 75 per cent of Sabari Components Limited on 1 April 2024 for ₹580.00 lakh. At that date Sabari had share capital of ₹400.00 lakh and retained earnings of ₹200.00 lakh. Its plant was carried at ₹300.00 lakh but had a fair value of ₹380.00 lakh, with a remaining life of eight years. Kosi measures the NCI at the proportionate share of identifiable net assets (Ind AS 103, paragraph 19(b)).
Working 1: goodwill and opening NCI (1 April 2024).
| Item | ₹ lakh |
|---|---|
| Book net assets (400 + 200) | 600.00 |
| Fair value uplift on plant | 80.00 |
| Identifiable net assets at fair value | 680.00 |
| Consideration | 580.00 |
| NCI at 25% of 680.00 | 170.00 |
| Goodwill (580.00 + 170.00 - 680.00) | 70.00 |
Check: the investment of ₹580.00 lakh equals the parent's 75 per cent of 680.00 (510.00) plus goodwill of 70.00.
Working 2: Sabari's equity adjusted, 31 March 2026. Sabari earned ₹90.00 lakh in 2024-25 and ₹110.00 lakh in 2025-26 and paid no dividend, so retained earnings are ₹400.00 lakh. The uplift adds depreciation of 80.00 ÷ 8 = ₹10.00 lakh a year (B88), so ₹20.00 lakh for two years and an uplift remaining of ₹60.00 lakh.
During 2025-26 Kosi sold goods to Sabari for ₹120.00 lakh at a margin of 25 per cent of selling price; Sabari still holds goods that cost it ₹40.00 lakh, so the unrealised profit is 40.00 x 25% = ₹10.00 lakh (downstream). Sabari sold goods to Kosi for ₹60.00 lakh; Kosi still holds goods bought for ₹30.00 lakh, bought at a 20 per cent margin on selling price, so the unrealised profit is ₹6.00 lakh (upstream). There is also a loan of ₹50.00 lakh from Kosi to Sabari, with trade balances of ₹25.00 lakh owed by Sabari to Kosi and ₹10.00 lakh owed by Kosi to Sabari.
| Post-acquisition equity of Sabari | ₹ lakh |
|---|---|
| Retained earnings now less at acquisition (400.00 - 200.00) | 200.00 |
| Less extra depreciation on uplift | (20.00) |
| Less upstream unrealised profit | (6.00) |
| Adjusted post-acquisition equity | 174.00 |
| Group share 75% | 130.50 |
| NCI share 25% | 43.50 |
Check: 130.50 + 43.50 = 174.00. NCI at 31 March 2026 = 170.00 + 43.50 = ₹213.50 lakh. As a cross-check, adjusted net assets of Sabari are equity 800.00 plus remaining uplift 60.00 less upstream profit 6.00 = 854.00; 25% of 854.00 = 213.50.
Working 3: the group's retained earnings. Kosi's own retained earnings are ₹950.00 lakh. Add the group share of Sabari's adjusted post-acquisition equity (130.50) and deduct the downstream unrealised profit (10.00): 950.00 + 130.50 - 10.00 = ₹1,070.50 lakh.
The consolidated balance sheet, 31 March 2026 (₹ lakh).
| Line | Kosi | Sabari | Adjustments | Consolidated |
|---|---|---|---|---|
| Goodwill | 70.00 | 70.00 | ||
| Investment in Sabari | 580.00 | (580.00) | ||
| Loan to Sabari | 50.00 | (50.00) | ||
| Group trade receivables | 25.00 | 10.00 | (35.00) | |
| Inventory | 200.00 | 150.00 | (16.00) | 334.00 |
| Plant and other assets | 1,345.00 | 800.00 | 60.00 | 2,205.00 |
| Total assets | 2,200.00 | 960.00 | (551.00) | 2,609.00 |
| Share capital | 1,000.00 | 400.00 | (400.00) | 1,000.00 |
| Retained earnings | 950.00 | 400.00 | (279.50) | 1,070.50 |
| Non-controlling interests | 213.50 | 213.50 | ||
| Loan from Kosi | 50.00 | (50.00) | ||
| Group trade payables | 10.00 | 25.00 | (35.00) | |
| Other liabilities | 240.00 | 85.00 | 325.00 | |
| Total equity and liabilities | 2,200.00 | 960.00 | (551.00) | 2,609.00 |
Check: assets equal equity and liabilities in each column and in the adjustments (-551.00). Adjustments to retained earnings: eliminate Sabari's 400.00, add the group share 130.50, deduct the downstream 10.00, a net -279.50. Inventory adjustment is 10.00 + 6.00 = 16.00. Plant and other assets adjustment is uplift 80.00 less extra depreciation 20.00 = 60.00 (the plant of ₹225.00 lakh within Sabari's 800.00 is at its own cost less depreciation over two years of ₹37.50 lakh each).
Profit for 2025-26. Kosi's own profit is assumed at ₹260.00 lakh.
| Item | ₹ lakh |
|---|---|
| Kosi's own profit | 260.00 |
| Sabari's profit | 110.00 |
| Extra depreciation on uplift | (10.00) |
| Downstream unrealised profit | (10.00) |
| Upstream unrealised profit | (6.00) |
| Consolidated profit | 344.00 |
| Attributable to NCI: 25% x (110.00 - 10.00 - 6.00) | 23.50 |
| Attributable to owners | 320.50 |
Check: 23.50 + 320.50 = 344.00. NCI roll-forward: 170.00 + 20.00 (25% of 90.00 less 10.00) at 31 March 2025, plus 23.50, gives 213.50.
The sales of ₹180.00 lakh between the two companies (120.00 + 60.00) are removed from revenue and cost of sales in the statement of profit and loss (B86(c)); the unrealised profit of ₹16.00 lakh is then taken out of closing inventory.
Presentation and disclosure
NCI is shown within equity, separately from the owners' equity (paragraph 22); see the Schedule III Division II treatment in our post on non-controlling interests under Part III and the standard's outline in our Ind AS 110 post. Disclosures about interests in subsidiaries are in Ind AS 112. The acquisition accounting that feeds Working 1 is covered in the business combination guide listed below.
Common mistakes
- Eliminating only the parent's share of intra-group profit (B86(c) requires full elimination).
- Charging the whole upstream elimination to the group instead of sharing it with the NCI.
- Forgetting the extra depreciation on fair value uplifts (B88).
- Using a subsidiary's statements for a different date without adjustment (B92, B93).
- Treating the NCI as a liability rather than part of equity (paragraph 22).
Need help with consolidation?
A first consolidation worksheet often needs a second look at fair values, unrealised profit and the NCI split. Our financial statement preparation team can build the group working paper and the consolidated notes alongside your finance team.
Key takeaways
- Combine line by line, eliminate the investment, and eliminate intra-group items in full.
- Goodwill is consideration plus NCI less net identifiable assets at fair value.
- Fair value uplifts bring extra depreciation to the post-acquisition results.
- Downstream unrealised profit falls on the parent; upstream is shared with the NCI.
- NCI is part of equity and takes its share of profit even into a deficit.
Read next
- Assessing control under Ind AS 110: power, variable returns, de facto control and potential voting rights
- Changes in ownership and loss of control under Ind AS 110
- Business combination under Ind AS 103: acquisition method, purchase price allocation, goodwill and NCI
- Consolidated financial statements: when and how to prepare
Disclaimer: Based on the Indian Accounting Standards as on 1 April 2025 (ICAI Compendium of Ind AS 2025-26, the standards notified under the Companies (Indian Accounting Standards) Rules, 2015) and, where named, the ITFG clarification bulletins of ICAI, as consulted on 4 October 2026. The worked example uses invented figures. Amendments notified after 1 April 2025 should be checked on mca.gov.in. This article is general information, not legal advice; check the official text before acting.