The companies act provides that a subsidiary may be omitted from the consolidated accounts of a group if any of the following apply.
- In the opinion of the directors, its inclusion is not material for the purpose of giving a true and fair view; but two or more undertakings may be excluded only if they are not material taken together.
- There are severe long term restrictions in exercising the parent company’s rights.
- The holding is exclusively for resale.
- The information cannot be obtained “without disproportionate expense or undue delay”.
If the opinion of the directors, a subsidiary undertaking’s consolidation is undesirable because the business of the holding company and subsidiary are so different that they cannot reasonably be treated as a single undertaking, then that undertaking must be excluded.
This does not apply merely because some of the undertakings are industrial, some commercial and some provide services, or because they carry on industrial or commercial activities involving different products or provide different services.