[et_pb_section bb_built=”1″ admin_label=”Header – All Pages” transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”||0px|” next_background_color=”#ffffff” custom_padding_tablet=”50px|0|50px|0″ custom_padding_last_edited=”on|desktop” global_module=”1221″][et_pb_row admin_label=”row” global_parent=”1221″ background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” title_all_caps=”off” use_border_color=”off” border_color=”#ffffff” border_style=”solid” title_font=”|on|||” title_font_size=”35″ custom_padding=”10px|||” parallax=”on” background_color=”rgba(255,255,255,0)” /][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”0px||0px|” padding_mobile=”on” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ prev_background_color=”#1e73be” next_background_color=”#ffffff” custom_padding_tablet=”0px||0px|” global_module=”1228″][et_pb_row global_parent=”1228″ make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”0px||0px|” padding_mobile=”off” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on” background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ background_layout=”light” text_orientation=”left” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid” background_position=”top_left” background_repeat=”repeat” background_size=”initial”]
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding_tablet=”0px||0px|” custom_padding_last_edited=”on|desktop” prev_background_color=”#ffffff” next_background_color=”#000000″][et_pb_row][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.106″ title=”Index” open=”off”]Section 9 – Consolidated and Separate Financial Statements
9.2 Requirement to present consolidated financial statements
9.2.1 Extract from FRS102: Section 9.2-9.3
9.2.2.1 No exception on the basis of activities being dissimilar or causing undue cost of effort
9.3 Definition of a subsidiary
9.3.1. Extract from FRS102: Section 9.4-9.6 and Section 9.8A
9.3.2.1 Definition of a parent
9.3.2.2 Definition of a subsidiary and control
9.3.2.2.1 Strategic, financial and operating decisions
9.3.2.2.2 Interpretation of benefits to be obtained as a result of power to control
9.3.2.2.3 Power to control even if not exercise
9.3.2.3 Potential voting rights
9.3.2.4 Less than 50% of share capital held but still have control
9.3.2.5 Greater than 50% of share capital owned but still not have control
9.3.2.6 Agreement entered into by a party with other shareholders
9.3.2.7 Shares held in bare trust
9.4 Subsidiaries excluded from consolidation
9.4.1 Extract from FRS102: Section 9.9-9.9B
9.4.2.1 a) Long term restrictions
9.4.2.1.1 Accounting policy choice
9.4.2.2 b) Subsidiary held with a view to a subsequent sale
9.4.2.2.1 Accounting requirements
9.5.1 Extract from FRS102: Section 9.10-9.12
9.6.1 Extract from FRS102: Section 9.13 – 9.14
9.6.2 OmniPro comment – The Subsidiary
9.6.2.1 Process of consolidation
9.6.2.3 Allocation to non-controlling interests where options are exercisable
9.7 Intragroup balances and transactions
9.7.1 Extract from FRS102: Section 9.15
9.7.2.3 Eliminating intra group transactions 100% owned – not in inventory at year end
9.7.2.4 Eliminating intra group transactions 100% owned – in inventory at year end
9.7.2.5 Eliminating intra group transactions not 100% owned – not in inventory at year end
9.7.2.6 Eliminating intra group transactions not 100% owned – some in inventory at year end
9.7.2.7 Year-end intra-group balance
9.7.2.8 Intra-group balances – sale of fixed assets within a group
9.7.2.9 Transactions between subsidiaries not consolidated
9.7.2.10 Elimination of notional amounts on intercompany/group loans not at market rates
9.7.2.11 Elimination of Intergroup dividends
9.7.2.12 Restatement of investment property to PPE for group purposes
9.8 Uniform reporting date and reporting period
9.8.1 Extract from FRS102: Section 9.16
9.9 Uniform accounting policies
9.9.1 Extract from FRS102: Section 9.17
9.10 Acquisition and disposal of subsidiaries
9.10.1 Extract from FRS102: Section 9.18-9.19D
9.10.2.2 Accounting for an acquisition where control is achieved in one transaction
9.10.2.3 Accounting for an acquisition where control is achieved in stages
9.10.2.4 Acquisitions where controlling interest is increased
9.10.2.5 Disposals where controlling interest is still retained
9.10.2.6 Disposal of a subsidiary where control is lost fully
9.10.2.6.1 Control lost but less than controlling interest still held
9.10.2.6.2 Indicators that control is lost
(see further details of how control is attained and by definition how control could be lost at 9.3.2)
9.11 Non-controlling interest in subsidiaries
9.11.1 Extract from FRS102: Section 9.20-9.22
9.12 Transferring a business within a group
9.13 Intermediate payment arrangements
9.13.1 Extract from FRS102: Section 9.33-9.38
9.14 Individual and separate financial statements
9.14.1 Extract from FRS102: Section 9.23A-9.26A
9.14.2.1 Overview and accounting policy choices
9.14.2.2 Fair Value through Profit and Loss Account
9.15.1 Disclosures in consolidated financial statements
9.15.1.1 Extract from FRS102: Section 9.23
9.15.1.2.1 Accounting Policies
9.15.1.2.1.1 Basis of consolidation
9.15.1.2.1.2 Subsidiary undertakings
9.15.1.2.1.3 Associates and joint ventures
9.15.1.2.1.4 Transactions eliminated on consolidation
9.15.1.2.1.5 Business combinations and goodwill
9.15.1.2.1.8 Intangible assets
9.15.1.2.1.9 Contingent acquisition consideration
9.15.1.2.2 Notes to the Financial Statements
9.15.1.2.2.1 Business combinations.
9.15.1.2.2.2 Financial assets – Group disclosure.
9.15.1.2.2.3 Financial assets note for the parent company in the consolidated financial statements.
9.15.1.2.2.4 Contingent consideration note.
9.15.2 Disclosures in separate financial statements.
9.15.2.1 Extract from FRS102: Section 9.27.
9.15.2.2.1 Accounting Policies.
9.15.2.2.1.1 Consolidated accounts.
9.15.2.2.1.5 Intangible assets.
9.15.2.2.1.6 Contingent acquisition consideration.
9.15.2.2.2. Notes to the financial statements.
9.15.2.2.2.1 Intangible assets.
9.15.2.2.2.3 Extract from the notes in the consolidated financial statements – negative goodwill.
9.15.2.2.3 Profit and Loss account.
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Section 9 – 9.2 Requirement to Present Consolidated Financial Statements
9.2.1 Extract from FRS102: Section 9.2-9.3
9.2 Except as permitted or required by paragraph 9.3, a parent entity shall present consolidated financial statements in which it consolidates all its investments in subsidiaries in accordance with this FRS. A parent entity need only prepare consolidated accounts under the Act if it is a parent at the year end.
9.3 A parent is exempt from the requirement to prepare consolidated financial statements on any one of the following grounds:
When its immediate parent is established under the law of an EEA State (Section 400 of the Act):
(a) The parent is a wholly-owned subsidiary. Exemption is conditional on compliance with certain further conditions set out in section 400(2) of the Act.
(b) The immediate parent holds 90% or more of the allotted shares in the entity and the remaining shareholders have approved the exemption. Exemption is conditional on compliance with certain further conditions set out in section 400(2) of the Act.
(bA) The immediate parent holds more than 50% (but less than 90%) of the allotted shares in the entity, and notice requesting the preparation of consolidated financial statements has not been served on the entity by shareholders holding in aggregate at least 5% of the allotted shares in the entity. Exemption is conditional on compliance with certain further conditions set out in section 400(2) of the Act.
When its parent is not established under the law of an EEA State (Section 401 of the Act):
(c) The parent is a wholly-owned subsidiary. Exemption is conditional on compliance with certain further conditions set out in section 401(2) of the Act.
(d) The parent holds 90% or more of the allotted shares in the entity and the remaining shareholders have approved the exemption. Exemption is conditional on compliance with certain further conditions set out in section 401(2) of the Act.
(dA) The parent holds more than 50% (but less than 90%) of the allotted shares in the entity, and notice requesting the preparation of consolidated financial statements has not been served on the entity by shareholders holding in aggregate at least 5% of the allotted shares in the entity. Exemption is conditional on compliance with certain further conditions set out in section 401(2) of the Act.
Other situations
(e) The parent, and the group headed by it, qualify as small as set out in section 383 of the Act and the parent and the group are considered eligible for the exemption as determined by reference to sections 384 and 399(2A) of the Act.
(f) All of the parent’s subsidiaries are required to be excluded from consolidation by paragraph 9.9 (Section 402 of the Act).
(g) For a parent not reporting under the Act, if its statutory framework does not require the preparation of consolidated financial statements.
In sub-paragraphs (a) to (dA), the parent is not exempt if any of its transferable securities are admitted to trading on a regulated market of any EEA State within the meaning of Directive 2004/39/EC.
9.2.2 OmniPro comment
As per Section 9.2 of FRS 102, a parent entity (see 9.3.2.1 for definition of a parent) is required to prepare consolidated financial statements unless they can claim any of the exemptions in Section 9.3 of FRS 102. Note even if the entity is not a company it should follow the guidance below as if it were; unless the framework for that entity specifically excludes the requirement for consolidated accounts.
To summarise, the exemptions from the requirements to prepare consolidated financial statements as stated in Section 9.3 of FRS 102, are:
– A parent which is considered a small group under the Companies Act (Section 293(1A) of CA2014) and therefore is exempt from preparation of the financial statements. In the UK this applies if it meets the conditions for small entities regime and in ROI if the Holding Company qualifies for the small companies regime. See Section 1A of FRS 102 for the qualification criteria for the small companies regime. A note in the parent company’s financial statements is required to allow readers to know that the entity has taken advantage of this exemption.
– An intermediate parent where the controlling company above the intermediate parent (note if the immediate parent who prepares consolidated financial statements is in the EEA it takes the exemption in Section 400 of the Companies Act 2006 (UK) and Section 299 of the Companies Act 2014.
If the parent is not in the EEA, then they avail of exemption in Section 401 of the Companies Act 2006 (UK) and Section 300 of the Companies Act 2014 prepares consolidated financial statements which incorporate the results of the intermediate parent and its subsidiaries to the same year end date or a date earlier than that date and they are prepared in accordance with the EC 7th Directive or an equivalent where the ultimate parent is not based in the EEA (US GAAP would usually be determined to be equivalent).
Note in order to claim the above exemption, the company intermediate parent must own 90% or more of the allotted shares in the intermediate parent and the remaining 10% must approve the exemption, or where between 51% and 90% is held, no notice has been served by shareholders holding 5% or more of the allotted shares.
Where this exemption is claimed the notes of the parent company should state the fact that it is exempt and detail the parents name that prepares the consolidated financial statements and the country in which it is incorporated.
It is also required to file the parent consolidated financial statements with Companies House / the Registration of Companies. Where a subsidiary is acquired part way through the year, the subsidiary must prepare its own consolidated financial statements in that year as the parent company consolidation would not include results for all of the financial year.
9.2.2.1 No exception on the basis of activities being dissimilar or causing undue cost of effort
Section 9.8 of FRS 102 makes it clear that a subsidiary cannot be excluded from consolidation just because the activities undertaken by that entity is dissimilar from the parent or any other subsidiaries.
Section 9 does not provide an exclusion on the basis of it causing undue cost or effort. The only exclusions are as detailed at 9.4.2
9.2.2.2 Basis for exclusion of subsidiaries from consolidation
A parent can exclude certain subsidaries from consolidation under Section 9.9 of FRS 102 where it arises due to (as per Section 9.3 (f) of FRS 102):
(a) severe long-term restrictions substantially hinder the exercise of the rights of the parent over the assets or management of the subsidiary; or
(b) the interest in the subsidiary is held exclusively with a view to subsequent resale; and the subsidiary has not previously been consolidated in the consolidated financial statements prepared in accordance with this FRS.
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Examples
Example 1: Exercise of dominant influence
Example 2: Potential voting rights
Example 3: Ability to control composition of the board
Example 5: Process of consolidation
Example 6: Eliminating intra group transactions 100% owned – not in inventory at year end
Example 7: Eliminating intra group transactions 100% owned – in inventory at year end
Example 8: Eliminating intra group transactions not 100% owned – not in inventory at year end
Example 9: Eliminating intra group transactions not 100% owned – some in inventory at year end
Example 10: Year-end intra-group balances
Example 11A: elimination of notional amounts on inter-company loans not at market rates
Example 11B: elimination of intergroup dividends
Example 11C: Restatement of investment property to property, plant and equipment
Example 13: Uniform accounting policies
Example 14: Business combination achieved in stages
Example 15: Acquiring a further controlling interest
Example 16A: Acquiring a further controlling interest but 100% interest still not attained
Example 17: Disposing of controlling interest but controlling interest retained
Example 18: Disposal of a subsidiary where control is lost
Example 21: Extract from notes to the financial statements – contingent consideration note..
Example 28: Extract from the notes in the consolidated financial statements – negative goodwill
Example 29: Profit and loss account
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