Companies Act requirement to prepare consolidated financial statements 19 / 24

Companies Act requirement to prepare consolidated financial statements

This section covers material from FRS 102 Sections 9, 14, 15, 19 and 30.

Except as permitted below, a parent entity should present consolidated financial statements in which it consolidates all its investments in subsidiaries in accordance with FRS 102.

A parent entity need only prepare consolidated accounts under the Act if it is a parent at the year end.

A parent is exempt under the Companies Act 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 restrictions set out in Section 400(2) of the Act.

  • (b) 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 restrictions set out in Section 400(2) of the Act.

When its immediate parent is not established under the law of an EEA State similar conditions apply under Section 301 of the Act.

Other situations

  • (a) 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.

  • (b) All of the parent's subsidiaries are required to be excluded from consolidation by paragraph 9.9 (Section 402 of the Act).

  • (c) For parents not reporting under the Act, if its statutory framework does not require the preparation of consolidated financial statements.