To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).
Tuesday brings cold sunshine and a more challenging section to begin reading...
DAY 12 (20 Jan)
Section 9 is titled 'Consolidated and Separate Financial Statements' and runs to ten pages and 38 paragraphs. It combines elements of FRSs 2 and 6 with company law (the section applies to non-corporates to the extent permitted by any other statutory framework). It also defines 'individual financial statements', which are similar to 'separate financial statements' but have a bit more personality and dress more flamboyantly.
We get the usual list of parents exempt from the need to prepare group accounts (9.3), a definition of control (9.4-9.6A) and excluded subsidiaries (9.8-9.9B). No surprises there, it would appear. But there is in fact one difference to note, concerning subsidiaries excluded from the consolidation because they are being held exclusively for resale. Under FRS 2 these would be treated as current asset investments and held at the lower of cost and NRV in the group accounts (or if they're in an investment portfolio, they could possibly be held at market value).
Under FRS 102, you'd measure such subsidiaries in investment portfolios at 'fair value through profit or loss' ('FVTPL'), and for non-portfolio subsidiaries you'd have an accounting policy choice between (a) cost less impairment, (b) fair value through OCI or (c) FVTPL, applied to all subsidiaries in the same class.
An important difference? Not I suspect for most of us. But I guess if you're a suave, mean subsidiary-buying machine (think Richard Gere in Pretty Woman, if that doesn't instantly age you) then it could make a significant difference to your balance sheet.
P.S. If you missed yesterday's instalment click here