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Accounting for Subsidiary Undertakings
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.
In Great Britain the Companies Act 1985 was amended by the Companies Act 1989, which introduced provisions dealing with parents and subsidiaries and group accounts?in particular section 258 defining parent and subsidiary undertakings and Schedule 4A on the form and content of group accounts. A large part of the FRS is therefore directly based on the Companies Act as amended and the requirements of the standard are consistent with the Act. (There is parallel legislation within Northern Ireland.) 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.
To find out how to obtain a copy of this FRS, go to Publications. |
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