Section 9 – 9.9 Uniform Accounting Policies

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Section 9 – Consolidated and Separate Financial Statements

9.1 Scope

9.2 Requirement to present consolidated financial statements

9.2.1 Extract from FRS102: Section 9.2-9.3

9.2.2 OmniPro comment

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 OmniPro Comment

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 Special purpose entities

9.5.1 Extract from FRS102: Section 9.10-9.12

9.5.2 OmniPro comment

9.6 Consolidation procedures

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 OmniPro comment

9.7.2.1 Overview

9.7.2.2 Deferred tax

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

9.8.2 OmniPro comment

9.9 Uniform accounting policies

9.9.1 Extract from FRS102: Section 9.17

9.9.2 OmniPro comment

9.10 Acquisition and disposal of subsidiaries

9.10.1 Extract from FRS102: Section 9.18-9.19D

9.10.2 OmniPro comment

9.10.2.1 Overview

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

9.11.2 OmniPro comment

9.12 Transferring a business within a group

9.12.1 OmniPro comment

9.13 Intermediate payment arrangements

9.13.1 Extract from FRS102: Section 9.33-9.38

9.13.2 OmniPro comment

9.14 Individual and separate financial statements

9.14.1 Extract from FRS102: Section 9.23A-9.26A

9.14.2 OmniPro comment

9.14.2.1 Overview and accounting policy choices

9.14.2.2 Fair Value through Profit and Loss Account

9.14.2.3 Fair Value through Other Comprehensive IncomeExample 18B: Adoption of fair value through other comprehensive income on transition

9.15 Disclosures requirements

9.15.1 Disclosures in consolidated financial statements

9.15.1.1 Extract from FRS102: Section 9.23

9.15.1.2 OmniPro comment

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

9.15.1.2.1.6 Goodwill

9.15.1.2.1.7 Impairment

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.

9.15.1.2.3 Consolidated Profit and Loss account and other comprehensive income sharing split between controlling and non-controlling interest.

9.15.1.2.4 Changes in Equity showing the movement on the cash flow hedge reserve in line with Section 9 and Section 12 disclosure requirements.

9.15.1.2.5 Extract from the consolidated Balance Sheet for negative goodwill and also showing non-controlling interest.

9.15.2 Disclosures in separate financial statements.

9.15.2.1 Extract from FRS102: Section 9.27.

9.15.2.2 OmniPro comment.

9.15.2.2.1 Accounting Policies.

9.15.2.2.1.1 Consolidated accounts.

9.15.2.2.1.2 Investments.

9.15.2.2.1.3 Dividend income.

9.15.2.2.1.4 Goodwill.

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.

9.15.2.2.2.2 Investments.

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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9.9 Uniform Accounting Policies

9.9.1 Extract from FRS102: Section 9.17

9.17 Consolidated financial statements shall be prepared using uniform accounting policies for like transactions and other events and conditions in similar circumstances. If a member of the group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements.

9.9.2 OmniPro comment

Section 9.17 of FRS 102 requires the subsidiary and parent/consolidated financial statements to adopt uniform accounting policies. If they are not uniform, then an adjustment will have to be made as part of the consolidation exercise.

Example 13: Uniform accounting policies

Group A has an accounting policy of expensing development costs however Subsidiary B has a policy of capitalising development costs that meet the capitalisation requirements. Therefore, in the consolidated financial statements the amount of development expenditure capitalised in Subsidiary B in the year has to be derecognised and posted to the profit and loss and any depreciation recognised has to be reversed.

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