Syllabus D. Financial Statements of Groups entities D1. Group Accounting

D1k. Group Accounting Exemptions 25 / 35

Syllabus D1k)

Identify and outline:
- the circumstances in which a group is required to prepare consolidated financial statements.
- the circumstances when a group may claim and exemption from the preparation of consolidated financial statements.
- why directors may not wish to consolidate a subsidiary and where this is permitted.

Group Accounting Exemptions

Who needs to prepare consolidated accounts?

Basically a parent company, one with a subsidiary

However there are exceptions to this rule:

  • The parent is itself a wholly owned subsidiary

  • The parent is a partially (e.g. 80%) owned sub and the other 20% owners allow it to not prepare consolidated accounts

  • The parents shares are not publicly traded

  • The parents own parent produces consolidated accounts

Sometimes a sub is purchased with a view to it being sold. 
In this case it is an IFRS 5 discontinued operation

The group share of its profits are shown on the income statement and all of its assets and liabilities shown separately on the SFP

Not Valid reasons for exemption

  1. A subsidiary whose business is of a different nature from the parent’s.

  2. A subsidiary that operates under severe long-term restrictions impairing the subsidiary’s ability to transfer funds to the parent.

  3. A subsidiary that had previously been consolidated and that is now being held for sale.