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).
Day 53 (29 Apr)
A short entry today (actually written yesterday as I sat awaiting the good citizenry of south Wales to join me in Bridgend for an update course).
A couple of posts ago I outlined the possibility under revised company law of equity accounting for associates in individual financial statements, even though there are no apparent plans to include this option within FRS 102.
I suspect that some of you would breathe a sigh of relief at this latter unwillingness to include such a treatment within UK GAAP. If we're not consolidating, it's nice to know we won't be asked to go through the awkward equity accounting process.
Except that we do. See para 14.15A of the standard which states:
The individual financial statements of an investor that is not a parent shall disclose summarised financial information about the investments in the associates, along with the effect of including those investments as if they had been accounted for using the equity method. Investing entities that are exempt from preparing consolidated financial statements, or would be exempt if they had subsidiaries, are exempt from this requirement.
Note that this applies to entities that are not parents. So the second sentence (investing entities that are exempt from preparing consolidated financial statements...are exempt from this requirement) cannot simply mean entities that are so exempt simply because they have no subsidiaries, as this would negate the entire disclosure. It appears to mean entities that, whether or not they have subsidiaries, would be de jure exempt (e.g. because they are small companies or parents of a small group).
This all means that an entity which would, were it a parent, be required to prepare group accounts (i.e. no exemptions are available) must, even though it isn't using equity accounting, disclose the effect of so treating the associate. Thus you'll still need to prepare the figures even though they'll only be used for disclosure purposes. It's enough to make a brave man weep into his pre-course coffee.
P.S. If you missed the last instalment click here