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).
Midweek and we're on our second day in section 9...
DAY 13 (21 Jan)
One of the business terms that gained notoriety in the Enron scandal is SPEs - Special Purpose Entities. These are undertakings (which could be companies, partnerships or unincorporated entities) set up for a narrow or short-term purpose (e.g. R&D development, employee share schemes or in connection with derivative financial instruments). Paras 9.10-9.12 confirm that these need to be included in group accounts wherever they are controlled by the parent, and there's a handy definition of control in 9.11.
Section 9 also discusses 'intermediate payment arrangements' such as ESOPs which were previously covered by UITF 32, and the snappily-titled 'exchanges of businesses or other non-monetary assets for an interest in a subsidiary, jointly controlled entity or associate' which were covered by UITF 31. (We all remember those UITFs, don't we??)
The standard emphasises the need for 'uniform' reporting dates (unless this is impracticable) and accounting policies (thus, for instance, a group of children's educational establishments would need schooluniform accounting policies...sorry, I'll stop now).
So are we done with section 9? No, not yet - there's an important change concerning the accounting for the situation where a parent increases its stake in a subsidiary. We'll look at this in tomorrow's instalment.
P.S. If you missed yesterday's instalment click here