Mixed picture for ASB on exclusion of subsidiaries

The Accounting Standards Board has been largely successful in reducing the number of companies excluding subsidiaries from the consolidated accounts.

Even so, the ASB should still be ‘disappointed in the disparity between practice and prescription’, according to this month’s Company Reporting.

The accounts analysis magazine said the proportion of companies not consolidating all subsidiaries has now fallen to just 3% from 7% since 1990, two years before the ASB issued FRS2, Accounting for subsidiary undertakings. The number of different reasons given by companies excluding subsidiaries has also fallen, because of tighter definitions of allowable exclusions.

But companies excluding subsidiaries from the group accounts ‘are, in general, failing to comply with some of the fairly clear requirements of FRS2’, the magazine said. It highlights sausage skin manufacturer Devro International, which deconsolidated a US subsidiary which it intends to dispose of and which is subject to a ‘hold-separate agreement’ under US federal law. The magazine said ‘it may, however, have been better to consolidate and show the effect of the … agreement in a separate column’.

See page 22.