There are a lot of separate entities that provide goods and services which produce accounting and financial statements which are subsidiaries of group companies. Unless a consolidated group accounts are prepared and presented the accounts will not presenting a fair view of the activities of the group as a whole (Catherine Hernandez)…
FRS 2 'Accounting for Subsidiary Undertakings' details the conditions under which a parent company of subsidiaries should prepare and present consolidated financial statements. The FRS also spells out the manner in which the consolidated accounts need to be prepared. As per the FRS the purpose of the consolidated financial statements is to provide detailed information about the activities of the whole group of undertakings including the subsidiaries (ASB). The FRS adopts the definition of a group as provided by the Companies Act 1985 as amended by the Companies Act 1989.
In the preparation of group accounts the primary consideration should be the effect on the users of the financial statements with respect to their ability to see the complete economic activities of the group and to ascertain the exposure of the parent company to risk through its interests in the subsidiaries and participation in their activities. Hence it becomes necessary that the qualitative aspects of materiality are given full consideration in respect of preparation of the group accounts.
The accounts of the subsidiaries are to be consolidated in accordance with the procedure laid down in FRS 2. This requires consolidation on a line-by-line basis and also the removal of the all transactions within the group companies. Goodwill on acquisition is to be calculated on the basis of FRS 2 and FRS 7.
In order to ensure that the parent company group accounts comply with the UK Generally Accepted Accounting Principles (GAAP) adjustments to the data from the subsidiary companies' accounts need to be made as the first step in the consolidation process. These adjustments managements may related to the profits or losses on disposal of assets and the notional interest and any directly controlled assets and liabilities that have been excluded from the subsidiary accounts.
The effect of consolidating the parent and the subsidiary companies may be that the aggregation being undertaken in the process of consolidation may obscure the useful information about the different companies whose accounts are being consolidated and by inclusion of the activities in the consolidated financial statements. Hence the parent companies usually provide a segment-wise analysis of the activities and their results in the financial statements with useful information on the various risks and rewards, as well as the growth and potential for profitability for different member companies of the group.
It is also mandatory that the financial statements of all subsidiary companies to be consolidated should have the same financial year end and must represent the financial results for the same accounting period as that of the parent company. When the parent company acquires a subsidiary company according to the FRS the identifiable assets and liabilities shall have to be brought in to the consolidation at fair values on the date the company became the subsidiary. This is so even when the acquisition is made in different stages.
A company's financial statements have three important components. The balance sheet, income statement and the cash flow statement. The balance sheet gives an overview of the assets and ...
Cite this document
(“Group accounts Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.net/miscellaneous/307733-group-accounts
(Group Accounts Essay Example | Topics and Well Written Essays - 1000 Words)
“Group Accounts Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.net/miscellaneous/307733-group-accounts.
These situations should at least be reduced if they cannot be reduced as a whole. The process of loss reduction involves a complex understanding about the following terminologies:1.CAPM and Arbitrage Pricing Theory 2.Efficient markets hypothesis and Pecking order theory 3.Modigilani and Miller approach and Residual theory
The performance of the company triples up the value of its shares. The demand for health care service remains high in the year 2007. The Group manage to increase the bed capacity by 25% during the year. This was much well ahead of the expectation with a net 132 homes and 7,298 bed added to the group.
Cost allocation and cost apportionment are the two procedures which describe the identification and allotment of costs to cost centres or cost units. Cost allocation refers to the allotment of all the items of cost to cost centres or cost units whereas cost apportionment refers to the allotment of proportions of items of cost to cost centres or cost units Thus, the former involves the process of charging direct expenditure to cost centres or cost units whereas the latter involves the process of charging indirect expenditure to cost centres or cost units.
Several reasons have attributed towards the limited financial earnings of the group, "ongoing consumer reticence in the main sales markets, the weak state of the used car markets as well as increasing refinancing costs" have significant influence on the earnings of the BMW Group.
Firms may window-dress the financial statements in order to show a rosy picture of their accounts. In such a case, the whole exercise of analyzing the statements becomes useless. Window-dressing is also done to forecast a better picture to shareholders, bankers and financial institutions.
After having successfully assembled the resources, the company is also required to assure all its stakeholders that it is indeed making good use of the resources in a manner benefitting all the stakeholders. This is considered as one of the important responsibility of the company.
This is one of the key reasons for revising the reporting requirements in respect of group company accounts by Financial Reporting Standard No2 (Shortly FRS 2).
Convergence on the presentation of the financial statements
This was much well ahead of the expectation with a net 132 homes and 7,298 bed added to the group. The Group was able to deliver shareholders value with the growth during the year finances completely through leaseback and
3 Pages(750 words)Essay
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Essay on topic Group accounts for FREE!