FRS 2 sets out the conditions under which an entity qualifies as a parent undertaking which should prepare consolidated financial statements for its group-the parent and its subsidiaries. In general an investor that controls an investee entity is its parent and should account for that entity as a subsidiary. The FRS also sets out the manner in which consolidated financial statements are to be prepared.

FRS 2 was amended in June 2009 to update the references in the FRS such that they correspond with the requirements set out in the Companies Act 2006 and the Large and Medium-sized Companies and Group (Accounts and Reports) Regulations 2008. 

The need to revise the earlier standard on group accounts arose because of the amendment of the Companies Act in 1989. However, the opportunity was to taken to conduct a thorough review of consolidated financial statements at the same time.

FRS 2 is effective for accounting periods ending on or after 23 December 1992. The amended FRS takes effect for accounting periods beginning on and/or after 6 April 2008, when the provisions of the Act/or the Regulations are applied to other entities (eg. limited liability partnerships), if later.