# Section 129 - Financial Statement

## Form and Content

Financial Statements (FS) shall give a true and fair view of the state of affairs of the company.
FS shall comply with the Accounting Standards (AS) notified under Section 133.
FS shall be in the form provided in Schedule III.

## Exceptions to Schedule III Format

Nothing in this section shall apply to:

Any Insurance Company or Banking Company,
Any company engaged in generation or supply of electricity, or
Any other class of company for which a form of FS has been specified under the Act governing such class.

For these companies, the form prescribed under the respective governing Act shall apply.

## Disclosure of Deviation from AS

Where FS do not comply with AS, the company shall disclose in its FS:

1. Deviation from AS

2. Reason for such deviation

3. Financial effect arising from such deviation

## Persons Responsible for FS Compliance

The following persons are responsible for ensuring FS comply with Section 129:

Managing Director (MD)
Whole-Time Director (WTD) in charge of finance
Chief Financial Officer (CFO)
Any other person charged by the Board with the duty

In absence of any of the above, all directors shall be responsible.

## Penalty for Non-Compliance

The responsible person shall be punishable with:

Imprisonment up to 1 year, OR
Fine of Rs. 50,000 to Rs. 5,00,000, OR
Both

## Consolidated Financial Statements (CFS)

Where a company has one or more subsidiaries / associates / joint ventures, it shall:

Prepare a Consolidated Financial Statement of the company and all subsidiaries/associates/JVs, in addition to its standalone FS
Lay CFS before AGM along with standalone FS

### Exemption from CFS Preparation (Rule 6 of Companies (Accounts) Rules)

A company is NOT required to prepare CFS if it satisfies ALL the following:

1. It is a wholly-owned subsidiary, OR a partially-owned subsidiary whose other members do not object to the company not presenting CFS

2. It is a company whose securities are not listed (or in the process of being listed) in India or outside India

3. Its ultimate or intermediate holding company files CFS in India which complies with applicable AS

### Attachment with FS

A separate statement containing salient features of the FS of subsidiaries / associates / JVs in Form AOC-1 shall be attached to FS.

## Manner of Consolidation

Consolidation shall be done in accordance with provisions of Schedule III and applicable AS (AS 21, AS 23, AS 27 or Ind AS 110, 28, 111).

Worked example

### Example 1

Example 1: H Ltd. is an Indian company with one subsidiary S Ltd. H Ltd. is a wholly-owned subsidiary of US-based UltimateHolding Inc., which files CFS in India in compliance with Indian AS. H Ltd. is unlisted. Is H Ltd. required to prepare CFS?

Answer: No. H Ltd. is exempted because: (i) it is a wholly-owned subsidiary, (ii) its securities are not listed in or outside India, and (iii) its ultimate holding company (UltimateHolding Inc.) files CFS in India complying with applicable AS.

### Example 2

Example 2: ABC Ltd. is a banking company. Must it follow Schedule III format?

Answer: No. Banking companies are exempt from Schedule III. They must follow the form prescribed under the Banking Regulation Act, 1949 (Third Schedule).

### Example 3

Example 3: DEF Ltd.'s FS contain a deviation from AS-2 in inventory valuation. What disclosures are mandatory?

Answer: Under Section 129(5), DEF Ltd. must disclose: (i) the deviation from AS-2, (ii) the reasons for such deviation, and (iii) the financial effect, if any, arising from such deviation.

⚠️ Common exam mistakes

Forgetting that banking, insurance, and electricity companies follow their own statutory format, not Schedule III.
Missing all three conditions for CFS exemption - all three must be cumulatively satisfied.
Confusing the penalty - it is Rs. 50,000 to Rs. 5 lakh and/or imprisonment up to 1 year for responsible persons.
Forgetting to disclose ALL THREE elements when there's deviation: deviation, reason AND financial effect.
Missing Form AOC-1 attachment requirement for salient features of subsidiaries/associates/JVs.

Bare-Act text Section 129 · Companies Act, 2013 · click to expand

Section 129(1) - The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III. Section 129(3) - Where a company has one or more subsidiaries or associate companies, it shall, in addition to financial statements provided under sub-section (2), prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own and in accordance with the applicable accounting standards. Section 129(5) - Without prejudice to sub-section (1), where the financial statements of a company do not comply with the accounting standards referred to in sub-section (1), the company shall disclose in its financial statements, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation.

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Section 129 - Financial Statement, AS Compliance and Consolidation

Worked example

⚠️ Common exam mistakes