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Posted by / 14-Sep-2020 23:59

For those that need further guidance, the provisions in FRS 2 should be consulted.

Steve Collings is the audit and technical director at Leavitt Walmsley Associates Ltd and the author of 'Interpretation and Application of International Standards on Auditing'.

Conclusion This article has looked at group accounting from a simple perspective.

The consolidation schedule which will be used to produce the consolidated financial statements of the group can be drawn up as follows: Acquisition accounting is essentially where one business acquires another business.

Merger accounting, however, is a business combination whereby the parties come together to share in future risks and benefits of the combined entity i.e. In merger accounting there is no issuance of shares and any difference which arises on consolidation does not represent goodwill, instead any such difference is added to, or deducted from, reserves.

Of course, there will be instances where consolidated financial statements are not as simple as this article has covered, however, this article has covered the “basic” approach to producing consolidated financial statements.

Many accounts production software programmes do enable the production of consolidated accounts, but may require ‘tweaking’ which is where an understanding of the basic concepts of group accounts is needed.

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Where the parent does not influence the financial and operational policies of the investee, or where share ownership is less than 51%, the investor shall account for the investee using FRS 9 as appropriate, or the FRSSE (effective April 2008) equivalent.

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