Where a subsidiary is excluded from group accounts, financial reporting standards (FRS) lays down supplementary provisions on the disclosures and accounting treatment required.
Where a subsidiary is excluded on group accounts should include separate financial statements for that subsidiary including:
- A note of the holding company’s interest
- Details of intra-group balances
- The nature of its transactions with the rest of the group
- A reconciliation of the subsidiary’s results (as shown separately) with the value in the consolidated accounts for the group’s investment in the subsidiary
In the consolidated accounts, the excluded subsidiary should be accounted for by the equity method of accounting (as though it were as associated company).
Subsidiary undertakings excluded from consolidation because of serve long-term restrictions are to be treated as fixed asset investments. They are to be included at their carrying amount when the restrictions came into force, and no further accruals are to be made for profits or losses of those subsidiary undertakings, unless the parent undertaking still exercises significant influence. In the latter case they are to be treated as associated undertakings.