Index Consolidation Financial Statements1. Types & Features of financial statements2. Objectives & Importance of financial statements Consolidated Financial Statement1. Definitions2. Objectives of CFS3. Scope of CFS4. Advantages of CFS5. Disadvantages of CFS6. Contents of CFS7. Steps Of CFS 8. Principals of CFS Individual financial Statements1. Difference between CFS & IFS

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Introduction of Infosys History of Infosys Vision & Mission Statement Policies for preparation of consolidated financial statments Statement of balance sheet , profit & loss , cash flow statement of Infosys

Conclusion / Summary.

What is consolidation? The combining of assets, liabilities and other financial items of two or more entities into one. In the context of financial accounting, the term consolidate often refers to the consolidation of financial statements, where all subsidiaries report under the umbrella of a parent company. Consolidation also refers to the merger and acquisition of smaller companies into larger companies. A consolidation, however, differs from a merger in that the consolidated companies could also result in a new entity, whereas in a merger one company absorbs the other and remains in existence while the other is dissolved.What are financial statements?Financial Statements represent a formal record of the financial activities of an entity. These are written reports that quantify the financial strength, performance and liquidity of a company. Financial Statements reflect the financial effects of business transactions and events on the entity.The four main financial statements for a small business include the income statement, the balance sheet, the statement of cash flow and the statement of owner's equity. Private companies and small businesses don't need to prepare financial statements. However, if they want to go public or need financing, a set of financial statements will come in handy. The statements help small business owners to compile their financial records, and compare the performance of the current period against prior periods and the industry average.

What Are the Types of financial Statements?Income StatementThe basic components of an income statement are revenues, expenses and profits. The top line usually shows the revenue and the bottom line displays the net income or loss. Companies incur losses if expenses exceed revenues. The size and complexity of a company determines the number of items on the income statement, but the key categories include sales, operating expenses and non-operating expenses. Gross profit equals sales minus cost of goods sold. Operating expenses include advertising, administrative and selling costs. Cost of goods sold equals the cost of acquiring, assembling or manufacturing products. Net income equals sales minus the sum of the cost of goods sold, operating expenses, interest and taxes. The income statement of a small company may have just two headings: "sales" and "expenses," with a list of the major items.

Balance SheetThe balance sheet components include assets, liabilities and owner's equity. Assets are displayed on the left side while the other two components are shown on the right side. The basic accounting equation states that assets must equal the sum of liabilities and owner's equity. Assets include current assets, such as cash and inventory, plus fixed assets, such as the plant and other property. Liabilities include short-term liabilities, including accounts payable, and long-term liabilities, such as bonds. A small business may not have any long-term debt. The owners' equity section of the balance sheet may contain just the ending balance of the period because the statement of owner's equity shows the calculation of the ending balance.

Statement of Cash FlowThe statement of cash flow for a large company usually groups the cash flow into the operating, investing and financing activities sections. However, this statement for a small business may contain just two sections: "cash inflows" and "cash outflows." Cash inflows include cash sales, collected receivables, investment income and fee income. Cash outflows include salaries, interest, rent, inventory purchases, utilities and line-of-credit balance repayments. Net cash flow is the difference between cash inflows and cash outflows.

Statement of Owner's EquityThe statement of owner's equity reports changes in owner's or partners' equity between accounting periods. The key components are the beginning equity balance, additions and subtractions during the period, plus an ending balance. Additions include the net income and additional owner investments, while subtractions include dividend payments and owner withdrawals. The ending balance equals the beginning balance plus additions minus subtractions.

Features of Financial Statements:

1. The Financial Statements should be relevant for the purpose for which they are prepared. Unnecessary and confusing disclosures should be avoided and all those that are relevant and material should be reported to the public.

2. They should convey full and accurate information about the performance, position, progress and prospects of an enterprise. It is also important that those who prepare and present the financial statements should not allow their personal prejudices to distort the facts.

3. They should be easily comparable with previous statements or with those of similar concerns or industry. Comparability increases the utility of financial statements.

4. They should be prepared in a classified form so that a better and meaningful analysis could be made.

5. The financial statements should be prepared and presented at the right time. Undue delay in their preparation would reduce the significance and utility of these statements.

6. The financial statements must have general acceptability and understanding. This can be achieved only by applying certain generally accepted accounting principles in their preparation.

7. The financial statements should not be affected by inconsistencies arising out of personal judgment and procedural choices exercised by the accountant.

8. Financial Statements should comply with the legal requirements if any, as regards form, contents, and disclosures and methods. In India, companies are required to present their financial statements according to the Companies Act, 1956.

Objectives of Financial Statement :

To know about business activities whether running at a profit or loss.To ascertain the financial position of the business.To provide meaningful information about the financial activities of a business to different persons or parties.To provide information about the capacity of the business for paying loan and interest thereon.To provide information about economic resources and obligations and their changing pattern.Importance of Financial Statements:The importance of financial statements lies in their utility to satisfy the varied interest of different categories of parties such as management, creditors, public, etc. 1.Importance to Management:The management team requires up to date, accurate and systematic financial information for the purposes. Financial statements help the management to understand the position, progress and prospects of business vis-a-vis the industry.

By providing the management with the causes of business results, they enable them to formulate appropriate policies and courses of action for the future. The management communicates only through these financial statements, their performance to various parties and justify their activities and thereby their existence.

A comparative analysis of financial statements reveals the trend in the progress and position of enterprise and enables the management to make suitable changes in the policies to avert unfavorable situations.

2. Importance to the Shareholders:

Management is separated from ownership in the case of companies. Shareholders cannot, directly, take part in the day-to-day activities of business. However, the results of these activities should be reported to shareholders at the annual general body meeting in the form of financial statements.

These statements enable the shareholders to know about the efficiency and effectiveness of the management and also the earning capacity and financial strength of the company.

By analyzing the financial statements, the prospective shareholders could ascertain the profit earning capacity, present position and future prospects of the company and decide about making their investments in this company.

3. Importance to Lenders/Creditors:

The financial statements serve as a useful guide for the present and future suppliers and probable lenders of a company.

It is through a critical examination of the financial statements that these groups can come to know about the liquidity, profitability and long-term solvency position of a company. This would help them to decide about their future course of action.

4. Importance to Labour:

Workers are entitled to bonus depending upon the size of profit as disclosed by audited profit and loss account. Thus, P & L a/c becomes greatly important to the workers. In wages negotiations also, the size of profits and profitability achieved are greatly relevant.

5. Importance to the Public:

Business is a social entity. Various groups of society, though directly not connected with business, are interested in knowing the position, progress and prospects of a business enterprise.

They are financial analysts, lawyers, trade associations, trade unions, financial press, research scholars and teachers, etc. It is only through these published financial statements these people can analyze, judge and comment upon business enterprise.

What is the meaning of consolidated financial statements?Consolidated financial statements refer to the financial statements which lead to the subsidiaries of the holding company its summative accounting figure. Putting another way, consolidated financial statements can be addressed as the combined financial statements of a parent company and its subsidiaries.According to IAS 27 "Consolidated and separate financial statements", consolidated financial statements are the financial statements of a group presented as those of a single economic entity.Definitions1. A subsidiary is a company that is controlled by another company (known as the parent)2. A parent (also known as a Holding Company) is a company that has one or more subsidiaries.3. A group is a parent and all its subsidiaries.4. Consolidated financial statements are the financial statements of a group presented as those of a single company.5. Equity is the residual interest in the assets of a company after deducting all its v liabilities.6. Minority interest is that part of the net results of operations and of the net assets of a subsidiary attributable to interests which are owned, directly or indirectly through subsidiary by the parent.

7. Control.Control means, basically,a. The ownership, directly or indirectly through subsidiary, of more than one-half of the voting power of a company ; orb. Control of the composition of the board of directors of a company so as to obtain economic benefits from its activities. A company is considered to control the composition of the board of directors of a company.

Objectives Of CFS :-

1.A parent that presents CFS should present these statements in addition to its separate financial statements. Users of the financial statements of a parent are usually concerned with, and need to be informed about the financial position and results of operations of not only the enterprise itselfBut also of the group as a whole. This need is served by providing the users-

a. separate financial statements of the parent ; andb. CFS, which presents financial information about the group as that of a single enterprise regard to the legal boundaries of the separate legal entities.

2. CFS are presented by a parent (also known as holding company) to provide financial information about the economic activities of its group.

3. CFS present financial information about a parent and its subsidiary as a single economic entity.

4. CFS show the economic resources controlled by the group, the obligations of the group and results the group achieves with its resources.

Scope of CFS:-

1. All Group Companies: This AS should be applied in the preparation and presentation of consolidated financial statements for a group of companies under the control of a parent. A parent which presents CFS should consolidate all subsidiaries , domestic as well as foreign.

2. Based on Respective FS: The CFS are prepared on the basis of financial statements of parent and all enterprises that are controlled by the parent.

3. Exclusions: No consolidation is done in the following cases:a. Amalgamations (governed by AS 14)b. Associates (governed by AS23)c. Joint ventures (governed by AS 27)d. Gratuity/PF Trust of subsidiaries whose composition of the governing bodies is controlled by the holding companies.

Advantages of CFS:-

The main advantages of consolidation are given below

1. Overall picture: From the consolidated financial statements, the usersof accounts can get an overall picture of the holding company and its subsidiaries. Consolidated Profit and loss account gives the overall profitability of the group after adjustments of unrealized profit involved in mutual transactions and division of profit of the subsidiaries into capital and revenue. Similarly, Consolidated Balance Sheet shows the state of affairs of the group after adjustment of mutual indebtedness and putting separately the minority interest.

2. Share Value Of Holding Co: Intrinsic share value of the holding company can be calculated directly from the consolidated balance sheet.

3. Return on investments in subsidiaries: The holding company controls its subsidiary. So its return on investments in subsidiaries should not be measured in terms of dividend alone. Consolidated Financial Statements provide information for identifying revenue profit for determining return on investment.

4. Acquisition of subsidiary: The minority interest data of the Consolidated Financial Statement indicates the amount payable to the outside shareholders of the subsidiary company at book value which is used as the starting point of negotiations at the time of acquisition of subsidiary by the holding company.

5. Evaluation of Holding Company in the market: The overall financial health of the holding company can be judged using consolidated financial statements. Those who want to invest in the shares of the holding company or acquire it, need such data.

Disadvantages

Consolidating financial statements for parent and subsidiary companies or related companies can provide investors and other interested parties with a comprehensive overview of the financial operations of the entities. However, some detail gets lost during the consolidation process that can result in misleading presentation. Most public companies are required to report on a consolidated basis, but unconsolidated and segmented information must also be reported to ensure readers of the financial statements have all the relevant information.The following are the some disadvantges of CFS :

Masks Poor Performance

When income statements are brought together and reported on a consolidated basis, the revenues, expenses and net profit are presented as combined figures. This can hide any profitability issues with one or more of the companies. For example, if a subsidiary lost a substantial amount of money in the year as a result of poor sales, financial statement readers may not see that information if the loss is combined with profits of the parent company.

Skews Financial Ratios

One way that investors assess the viability of a company is by its ratios. Ratios are comparisons between financial statement lines. For example, the current ratio is current assets divided by current liabilities. This ratio tells investors how well the company will be able to pay its near-term obligations. In a consolidated financial statement, each company's assets, liabilities and income are combined. Financial ratios based on combined numbers may not be representative of each company's ratios. If one of the companies has a high level of debt compared to the equity of the owners, that leverage would be hidden in a consolidated statement.

Hides Inter-company Sales

All inter-company transactions are removed in a consolidation. On one hand, this presents a truer view of the companies by showing only financial activity with non-related parties. However, it also hides the level of inter-company transactions. If related companies spend most of their time and resources selling products or services in the group, an outside investor will not be able to assess transfer prices or profit-shifting in the group. Both of these things can be manipulated by companies and can affect income taxes. Consolidation hides the extent of the inter-company activity.

Contents of CFS:

1. Which Statements: Consolidated Financial Statements normally includea. consolidated balance sheet.

b.consolidated statements of profit and loss, andc. notes, other statements and explanatory material that form an integral part thereof.

d. Consolidated cash flow statements is presented in case a parent presents its own cash flow statements2. Format: The consolidated financial statements are presented, to the extent possible, in the same format as that adopted by the parent for its separate financial statements.

Steps in Consolidation :

In order that the consolidated financial statements presents financial information about the group as that of single enterprise, the following steps should be taken:

1. Eliminate Parents Cost of Investment & Portion of Equity.

2. Calculate Goodwill or Capital Reserve Arising on Investment

3. Calculate Minority Interest

4. Analyse Profits of subsidiary into Profits before and after Acquisition.

5. Make Intra- Group Adjustments.

6. Treatment of Investments made on Different Date

6. consolidated Profit & loss statements

7. Harmonise Reporting dates

8. Harmonise Accounting policies.

The key entities used in the construction of consolidated statements are:

1.A group is a parent entity and all of its subsidiaries2.A subsidiary is an entity that is controlled by a parent company3.De-subsidiarisation

What are the principles applied in preparing consolidated financial statements?The idea of consolidated financial statements is to show the group, in line with its substance, as a single economic entity. This is done by replacing the cost of investment recorded in the parents individual records and, instead, adding in 100%, line by line, of the subsidiarys assets, liabilities, income and expenses to show control.

What Are Individual Financial Statements ?

A company that is owned by a parent company, but whose individual financial statements are not included in the consolidated or combined financial statements of the parent company to which it belongs. Instead, this type of company appears in the combined financial statement as an investment.

Difference between CFS & IFS :If one company owns part or all of another company, it may be required to prepare a consolidated financial statement. The companies remain separate legal entities and each maintains its own set of books. Consolidated financial statements are often used for reporting to investors, government agencies or applying for loans and grants. Statement 141 from the Financial Accounting Standards Board lays out the rules for preparing consolidated financial statements.Individual Financial StatementsAll businesses must prepare a set of financial statements showing the activity for the previous accounting period. This typically includes a balance statement, income statement, statement of cash flows and a report of shareholders' equity. The individual financial statements show all transactions regardless of the source of the funds. Subsidiary holdings must be shown as a stock asset on the parent company's financial statements and shareholders' equity on the subsidiary's financial statements. Standalone financial statements are not required for companies owned 100 percent by the parent but may be used for internal management purposes.Consolidated Financial StatementsA consolidated financial statement combines the information from the subsidiary companies' individual financials. The entire enterprise is treated as a single entity for accounting purposes. You must adjust the accounts on the general ledger to represent the ownership percentage of the parent company. Use the company's goodwill account to post the balancing entries to your adjustments.Illustration : Green Co owns the following investments in other companies:Equity shares held Non-equity shares heldViolet Co 80% NilAmber Co 25% 80%Black Co 45% 25% Green Co also has appointed five of the seven directors of Black Co.Which of the following investments are accounted for as subsidiaries in the consolidated accounts of Green Co Group?A Violet onlyB Amber onlyC Violet and Black D All of themAnswerLets consider each of the investments in turn to determine if control exists and, therefore, if they should be accounted for as a subsidiary. Violet Co by looking at the equity shares, Green Co has more than 50% of the voting shares ie an 80% equity holding. This gives them control and, therefore, Violet Co is a subsidiary. Amber Co you must remember to look at the equity shares, as despite having the majority of the non-equity shares, these do not give voting power. As Green Co only has 25% of the equity shares, they do not have control and, therefore, Amber Co is not a subsidiary. Black Co by looking at the percentage of equity shares, you may incorrectly conclude that Black Co is not a subsidiary, as Green Co has less than half of the voting rights. However, by looking at the fact that Green Co has appointed five of the seven directors, effectively they have control over the decision making in the company. This control should make you conclude that Black Co is a subsidiary.Therefore the correct answer is C.Illustration (2)Pink Co acquired 80% of Scarletts Co ordinary share capital on 1 January 2012.

As at 31 December 2012, extracts from their individual statements of financial position showed:

Pink C$Scarlett Co$Current assets:Receivables50,00030,000Current liabilities:Payables70,00042,000

As a result of trading during the year, Pink Cos receivables balance included an amount due from Scarlett of $4,600.

What should be shown as the consolidated figure for receivables and payables?

Receivables$Payables$A80,000112,000B75,400112,000C74,000103,600D75,400107,400

AnswerFrom the question, we can see that Pink Co has control over Scarlett Co. This should mean that you immediately consider adding together 100% of Pink Cos balances and Scarlett Cos balances to reflect control.

However, the intra-group balances at the year end need to be eliminated, as the consolidated accounts need to show the group as a single economic entity in other words, the group position with the outside world.

As Pink Co shows a receivable of $4,600, then in Scarlett Cos individual accounts there must be a corresponding payable of $4,600. When these balances are eliminated, the consolidated figures become:

Receivables ($50,000 + $30,000 $4,600) = $75,400Payables ($70,000 + $42,000 $4,600) = $107,400

Therefore, the correct answer is D, not A which completely omits the elimination of the intra-group balances, nor answer B which omits to cancel the corresponding payable within liabilities.

You would not select answer C, which incorrectly adds 100% of Pink Co (the parent) and only 80% of Scarlett Co (the subsidiary).

Introduction Infosys Limited (formerly Infosys Technologies Limited) is an Indian multinational corporation that provides business consulting, information technology, software engineering and outsourcing services. It is headquartered in Bangalore, Karnataka.[3]Infosys is the second-largest India-based IT services company by 2014 revenues,[4] and the fifth largest employer of H-1B visa[5][6] professionals in the United States in FY 2013.[7] On 15 February 2015, its market capitalisation was 263,735 crores ($42.51 billion), making it India's sixth largest publicly traded companyInfosys Limited (Infosys) is a services company that provides business consulting, technology, engineering and outsourcing services. The Company also offers products, platforms and solutions to clients in different industries. Its business solutions include business IT services, consulting and systems integration services, products, business platforms and solutions, and cloud computing and enterprise mobility. Business IT services comprise application development and maintenance, independent validation services, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management. Consulting and systems integration services include consulting, enterprise solutions, systems integration and advanced technologies. Products, business platforms and solutions include Finacle, the companys banking product.

History Infosys was co-founded in 1981 by Narayan Murthy, Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora after they resigned from Patni Computer Systems.[11] The company was incorporated as "Infosys Consultants Pvt Ltd." with a capital of 10,000 or US$1,250 (about $3,243 in 2015) in Model Colony, Pune as the registered office.[12] It signed its first client, Data Basics Corporation, in New York.[13] In 1983, the company's corporate headquarters was relocated from Pune to Bangalore.[13]

Change in name: The company changed its name to "Infosys Technologies Private Limited" in April 1992 and to "Infosys Technologies Limited" when it became a public limited company in June 1992. It was later renamed to "Infosys Limited" in June 2011.[14]From the beginning, the company was founded on the principle of building and implementing great ideas that drive progress for clients and enhance lives through enterprise solutions. For over three decades, we have been a company focused on bringing to life great ideas and enterprise solutions that drive progress for our clientsInfosys has a growing global presence with more than 179,000+ employees. Globally, we have 85 sales and marketing offices and 100 development centers as at March 31, 2015.

Vision and Mission of Infosys Infosys International Inc. has a solid reputation as a business and information technology consulting company.

Our VisionTo help our clients meet their goals through our people, services and solutionsOur MissionInfosys International Inc. is dedicated to providing the people, services and solutions our clients need to meet their information technology challenges and business goals.Work to understand the needs and requirements of our clients before proposing a solutionDevelop responsive proposals that provide cost-effective solutions to our clients needsDeploy the right mix of people and products to deliver value-added services and solutions to our clientsFollow-up on the quality of our services and solutions to our clientsAppreciate the trust that our clients put in us as we work with them to improve their business and information technology.

Policies for preparation of consolidated financial statements These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historicalcost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprisesmandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (Act) read with Rule 7 of the Companies(Accounts) Rules, 2014 and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have beenconsistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standardrequires a change in the accounting policy hitherto in use.he financial statements are prepared in accordance with the principles and procedures required for the preparation and presentation ofconsolidated financial statements as laid down under the Accounting Standard (AS) 21, Consolidated Financial Statements. Theconsolidated financial statements comprise the financial statements of the company, its controlled trusts and its subsidiaries as disclosed inNote 2.21, combined on a line-by-line basis by adding together book values of like items of assets, liabilities, income and expenses aftereliminating intra-group balances and transactions and resulting unrealised gain/loss. The consolidated financial statements are prepared byapplying uniform accounting policies in use at the Group. Minority interests have been excluded. Minority interests represent that part ofthe net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the companyAssociates are entities over which the group has significant influence but not control. Investments in associates are accounted for using theequity method of accounting as laid down under Accounting standard (AS) 23, Accounting for Investment is Associate in ConsolidatedFinancial Statements . The investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize theinvestors share of the profit or loss of the investee after the acquisition date. The groups investment in associates includes goodwillidentified on acquisition.

Conclusion / Summary.

The combining of assets, liabilities and other financial items of two or more entities into one.Financial Statements represent a formal record of the financial activities of an entity. Consolidated financial statements refer to the financial statements which lead to the subsidiaries of the holding company its summative accounting figure. Putting another way, consolidated financial statements can be addressed as the combined financial statements of a parent company and its subsidiaries A subsidiary is a company that is controlled by another company (known as the parent). A parent (also known as a Holding Company) is a company that has one or more subsidiaries. A company that is owned by a parent company, but whose individual financial statements are not included in the consolidated or combined financial statements of the parent company to which it belongs is called as individual financial statements. Difference between consolidated and individual financial statements. Then we draft about the Infosys Co.Its introduction and history. What were the polices adopted by Infosys to make consolidated financial statements. Then we prepared its financial statements.