Our company is forming an ordinary partnership in which there is one other partner, the share of profits is set up 99.9% Ltd company 0.01% other partner.
I was of the understanding that at year end I would consolidate the ordinary partnership balance sheet and p&l into the LTD companies accounts as the partnership represents a subsidiary. In line with FRS 102 standards.
However my auditors have suggested that the LtD company could bring in 99.9% of the partnership accounting profit into the P&L and show a corresponding investment on the balance sheet. I believe using standard in FRS relating to investments in subsidiaries.
What is the correct accounting approach? If it is what the auditors have suggested why would I not consolidate on a line by line basis.
Many thanks
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I’m going to do a “John” and ask “why the structure?”
Your auditors are right and you are wrong.
Can you elaborate as to why so I can understand better?
Why? As in why are you wrong and they are right...
Because the auditors are professional accountants who are paid to advise and you are not.
I am a professional accountant, but thank you for your helpful advice.
I am simply trying to understand why their treatment is correct.
Have you considered 9.3 as a possible reason for the auditor's viewpoint, you have not indicated whether or not the parent requires to prepare consolidated accounts?
If pertinent then consider 9.26.
The company is a partner in a partnership.
You should prepare partnership accounts as normal, and then the company receives 99.99% of the profit of the partnership as turnover/income with the other side being 'Investment in Partnership'.
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