Extension Of Group Accounts Exemption

The amendment to the Companies Act permitting an intermediate parent company to take advantage, subject to certain conditions, of an exemption from preparing group accounts regardless of where its parent undertaking is incorporated, was discussed in the March 2006 issue of our Financial reporting newsletter. Previously the exemption was only available where the parent entity was established under the law of a European Economic Area (EEA) state.

To take advantage of this exemption, which came into effect from 1 January 2005, the consolidated accounts for the larger group in which the company is included are required to be drawn up in a manner ‘equivalent to consolidated accounts drawn up in accordance with the EU Seventh Company Law Directive.’ Interpreting how to apply these equivalence provisions is difficult in practice, so the UITF has issued a draft abstract to help companies determine if they can take advantage of the exemption.