How To Account for Small Company Subsidiary?

Want to confirm how to account (cost vs fair value) if not consolidating

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Please can someone advise on accounting treatment for the following scenario:

  • UK parent company - preparing small company accounts under FRS102
  • During the year this company opened a 100% owned US subsidiary.  Purchased the share capital of $100
  • US subsidiary made a $300K loss during the year
  •  Now preparing the UK company accounts and want to confirm what accounting treatment to apply
    (Note - the parent is small and the overall group would be small - so we do not want to prepare consolidated group accounts)

Should we account for the entry in the UK accounts as $100 Investment in Subsidiaries with a Note to the accounts that Investments are recorded at cost?
Or is it required to adjust to fair value?  (Note that the loss made by the US company in its first year is expected to be offset by a profit in year 2)

Thanks for any advice on this one...

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paddle steamer
By DJKL
27th Jan 2020 14:25

It is in FRS102

https://www.frc.org.uk/getattachment/69f7d814-c806-4ccc-b451-aba50d6e8de...(March-2018).pdf

Accounting policy election in separate financial statements
9.26 When a parent prepares separate financial statements, it shall select and adopt a policy
of accounting for its investments in subsidiaries, associates and jointly controlled
entities in those separate financial statements either:
(a) at cost less impairment;
(b) at fair value with changes in fair value recognised in other comprehensive income
(or profit or loss) in accordance with paragraphs 17.15E and 17.15F; or
(c) at fair value with changes in fair value recognised in profit or loss.
The Appendix to Section 2 Concepts and Pervasive Principles provides guidance on
determining fair value.
An entity shall apply the same accounting policy for all investments in a single class (for
example investments in subsidiaries that are held as part of an investment portfolio,
those that are not so held, associates or jointly controlled entities), but it can elect
different policies for different classes.
This also applies to entities preparing individual financial statements.
86 FRS 102 (March 2018)
9.26A A parent that is exempt in accordance with paragraph 9.3 from the requirement to
present consolidated financial statements, and presents separate financial statements
as its only financial statements, shall account for its investments in subsidiaries,
associates and jointly controlled entities in accordance with paragraph 9.26.

Thanks (1)