FRS 102 Group Accounts User Guide

Group structure

At least three entities will be created for a group, being the group entity, the parent entity and a subsidiary entity. 

Key: 0 - Consolidation Entity 1 - Parent entity 2 - Subsidiary 1 3 - Subsidiary 2

1. From the Reference folder, click on the node Consolidation Group.

Adding the parent entity

Either click Add Parent on the ribbon or, to the right of Parent Name, click on the '…' ellipsis button (see above). A pop-up box will appear (see below). Within this, search for the parent entity, select and click OK.

Once the parent has been selected, the Chart Length, Year End and Parent MPV will be displayed in the area above the grid in which the subsidiaries will be selected and listed (see above).

Linking subsidiaries

3. Either click Add Subsidiary on the ribbon or, under the column header Subsidiaries, click on the ellipsis button, the pop-up box will reappear. Within this, search for the first subsidiary entity, select and click OK.
4. Repeat step (3) for each subsidiary.
5. Tick the check box if the subsidiary is wholly owned (see below) - if the tick is not accepted, click off the screen and back on again.

Explanation of other columns within the grid

Wholly owned - The wholly owned tick box has no effect on the figures. It is there to suppress disclosure of subsidiaries and directors’ names in the Directors’ Report.
Chart length - To verify that the nominal code structure of all entities in the group is the same. Any nominal code that exists in one entity and not others need to be added across the whole group.
Year end - To verify that the year-ends of all members of the group are the same.
Entity type - Displays the type of Entity of each subsidiary, eg Limited (FRS102)

Consolidation figures

Full collection

This provides the pages and notes for the Consolidated financial statements, and follows the order and content of the FRS 102 Limited Company formats.

The balance sheet, cash flow, statement of changes in equity and all balance sheet notes, together with most other non-P&L disclosures, are split into Group and Parent company sections. The income statement and its notes include only consolidated figures.

The accounting policies relate to the Group as a whole.

Management collection

The following reports are provided within this collection:

Group detailed income statement and schedules

This provides an income statement showing the consolidated posting to individual nominal accounts. There are optional separate schedules for cost of sales, distribution and admin costs, triggered by flag #mc1 in the statutory database. Where this option is not chosen, the income statement will show the detail instead of the totals for each.

Parent company income statement 

This is the parent income statement in standard Companies Act presentation, with options to show according to Format 1 or 2.

Group audit trail

This report includes columns for the figures of the following: 

• total group  
• consolidation adjustments 
• the parent entity  
• up to fifteen subsidiary companies.   

Note how the formulae call up the relevant figures:

•  "0" or no numerical marker refers to group entries, ie journals and database adjustments.
•  "1" refers to the parent.
•  "2" refers to the first subsidiary, and so on for the others.
•  "Sum" refers to the group total.
•  "Sumex" refers to the group total before group adjustments.

The subsidiaries displayed may be increased by adding in more columns, copying the formula within the report and changing the unique subsidiary identifier number in the column(s) eg change '16' (which refers to subsidiary 15) to '17' (which will then refer to subsidiary 16).

The page may be exported to Excel, which will display the figures as values not formula, as for all pages/notes in CCH Accounts Production. 

Note: Where nominal chart codes have been subcoded in the parent or subsidiaries, those subcodes must also be added to the group nominal chart; otherwise there will be errors in the presentation.

The layout of the Group Audit Trail is as shown below:​​​​​​​
​​​​​​​

Exception report

The purpose of this report is to highlight tailoring questions within the Statutory Database for which the response given in the Consolidation does not match the response given in the Parent.

Only those items which do not match will be displayed. For information on the item, double click into the report to see the format of the report and areas being checked.

General tab

The following information is picked up from the group database:

• Company name (ie the name of the group)
• Trading name (ie the trading name of the group, if relevant).
• Period end information
• First year details
• Draft message

The following information is picked up from the parent entity database:

• Country of incorporation
• Registration number
• The Professional accountancy body may be changed at the client level, although this will usually feed from the master setting. 

Rounding

If preparing the group financial statements to the nearest thousand or million, change the rounding unit within General Information of the group entity.

Subsidiaries may apply different rounding settings to that of the group, but those roundings are ignored at the group level. The Name Range balances are obtained from each subsidiary using the actual values, and then rounding is applied at the consolidation level.

Client preferences

These are set at the consolidation level.

Strategic report

Information is drawn from the consolidation database.

Directors’ report

Information is drawn from the consolidation database, except that officers' information comes from the parent.

Audit report

The Auditor's name and address is taken from the parent. All other information relating to the audit report is drawn from the consolidation database.

Accountants’ report

Information regarding the accountants’ report is drawn from the consolidation database.

Income statement

Presentation options are set in the consolidation database. Optional descriptions in grids are generally taken from the parent company.

Balance sheet

Presentation options are set in the consolidation database. Optional descriptions in grids are generally taken from the parent company.

Note the option to display the group and company pages together or separately.

Statement of changes in equity

The entry of amendable headings and the analysis of total "other movements" is carried out in the consolidation database since the group might analyse these items differently from the parent/subsidiaries, or combine them where they are individually immaterial.

Statement of cash flows

The cash flow works on a consolidated total basis, and therefore adds the amounts entered in the parent entity and all the subsidiary companies together, including all statutory database disclosure adjustments. Entries in the group database will be added to those already shown in the parent and subsidiaries.

Therefore, the first step is always to ensure that the individual cash flows for the parent and each subsidiary balance. Where those are correct, it is unlikely that the group figures will show a difference. Additional adjustments in the group cash flow should arise only in response to the effect of group journals.

Presentation options are set in the consolidation database. 

The reallocation between operating activities, financing activities and investing activities is chosen at group level for investment income, interest paid and dividends paid. 

Accounting policies

All group accounting policies are entered in the group database, including the basis of consolidation. 

If there are any adjustments to the Intangible assets or Tangible assets headings when disclosing depreciation rates, these are made in the group entity (within the Intangible assets, Asset type headings and Tangible assets, Asset type headings sections of the Balance Sheet Notes tab).

Profit and loss account notes

The general rules are:

• Presentation choices and text paragraphs are generally picked up from the group database.
• Optional descriptions in grids are generally taken from the parent company.
• Numerical entries in grids will generally be required only for group consolidation adjustments.

The following group values are picked up from the group entity database alone:

• Turnover analysis - Revenue 
• Taxation - Tax rate 
• Audit fees - All adjustments

The following group values are picked up from the trial balance and database entries of the parent entity alone:

• Payments of dividends
• Directors' remuneration - but with a separate grid in the group to record payments to group directors made by subsidiaries.

Balance sheet notes

The general rules are:

• Parent company disclosures are picked up automatically from the parent database.
• Group paragraphs and presentation options are normally picked up from the group entity.
• For most numerical value disclosures, the company and subsidiary database adjustments are aggregated. Therefore, information only needs to be added in the group entity if there are consolidation adjustments in the area.

The following group values are picked up from the group entity database alone:

• Fixed asset investments - Carrying values differing from fair value

For retirement benefits, the user has the following options:

This permits the user to specify whether (a) to show both a parent and group scheme; (b) to show only a group scheme; or (c) show only a parent scheme. 

For share based payments, the user has a similar choice between parent/group/combined schemes.

The following group values are picked up from the trial balance and database entries of the parent entity alone:

• Share capital information

Other notes

The general rules are the same as used for balance sheet notes.

The following values are picked up from the group entity database alone:

• Acquisition of subsidiary
• Disposal of subsidiary
• Transactions with directors 
• Related party transactions

Non-controlling interests

Nominal codes exist for postings which feed through to the P&L, balance sheet and statement of changes in equity: 

Shares purchased from or disposed to non-controlling interests
5205  Purchase of shares in subsidiary from non-controlling interest (retained earnings element) 
5206  Disposal of shares in subsidiary to non-controlling interest (retained earnings element) 

Profits and dividends for non-controlling interests
5995  Minority interest in current profit - contra to 5997 
5996  Minority interest in other comprehensive income - contra to 5997 
5997  Minority interest contra against retained earnings 
5998  Dividends paid to Minority interests - contra to 5999 
5999  Minority dividends contra 

Reserves balance
9770  Non-controlling interests balance brought forward 
9771  Acquisition of controlling interests 
9772  Disposal of controlling interests 
9773  Other adjustments to non-controlling interests 
9775  Purchase of shares in subsidiary from non-controlling interest 
9776  Disposal of shares in subsidiary to non-controlling interest 

Other entries

Directors' remuneration:  There is a separate grid in the group to record payments to group directors made by subsidiaries.

Balance sheet presentation:  The user can choose to show the group and company balance sheets on one page, instead of two separate pages.

Bank account offset:  Bank figures can be offset against overdrafts where the group has right of offset.

VAT balances offset:  Amounts receiveable can be offset against amounts payable where the group has right of offset.

Retirement benefits:  Where the parent company scheme is not also the group scheme, the user can enter and disclose information about the group scheme.

Share based payments:  Where the parent company scheme is not also the group scheme, the user can enter and disclose information about the group scheme.

Individual financial statements

The financial statements of the parent and all subsidiaries should be as complete as possible before trying to prepare the consolidated statements. All areas of the statutory database that will be disclosed in the group should be completed for each group member, which might require users to temporarily flag the size of an individual company as 'large' or 'medium' so as to activate all the disclosure areas, eg where the individual company is small but the group company is not.

Similarly, where the parent entity is taking advantage of the reduced disclosure framework option, the user will need to temporarily flag the parent as not taking this option so that the exempted disclosures are visible and can be completed for inclusion in the group.

It is particularly important to make sure that the cash flow statement of each company balances correctly before trying to 'fix' the cash flow for the group, since any differences will be aggregated within the group.

Dividends

All or part of the subsidiary entity’s dividends will be payable to the holding entity and are therefore inter-group transactions. These must be adjusted against one another (ie cancelling income received vs dividends paid) using consolidation journals so that only external dividends are disclosed, being: 

• parent dividends paid, plus
• any dividends paid by subsidiaries to minority interests

As an example, where the parent holds 70% of the equity shares and the subsidiary has paid a dividend of £100, £70 of this would be eliminated by a consolidation journal: 

Dr 4200 Dividends receivable      70 (removes the full amount received by parent) 

Cr 5001 Dividends paid                 70 (removes part of the dividend paid by the subsidiary) 

The remaining £30 is still included in the consolidated figure for dividends paid, which is correct. However, this then needs to be identified as a payment to the non-controlling interest which affects the value of that interest and therefore a further journal is needed: 

Dr 5998 Dividends paid to minority        30  

Cr 5999 Minority dividends contra         30  

This journal will ensure that the non-controlling interest is adjusted for dividends paid, rather than adjusting the group’s interest. 

Parameters used in formulae

This is best explained by examples for turnover:

Similar rules are applied for other types of value, eg

APGROUP("1","a,#on57")

APGROUPSTATRANGE("1","a","SSUBSD")

Multi group subsidiary

It is possible to add a subsidiary to more than one consolidation at the same time, eg where the group includes interim groups. The option is enabled for each entity, by selecting the “Multi group subsidiary” option on the ribbon:

The Task Permission is: #Client #Allow Consolidation Multiple group Subsidiaries
If the user is working within the subsidiary accounting period and clicks the consolidation group option, they will now be prompted to select which group is opened. 

Note that this does not support the scenario where the subsidiary is partly owned by two or more unrelated groups, requiring the subsidiary’s balances to be apportioned to the various parent companies. In this rare circumstance, the user would need to create at least one dummy subsidiary, or else enter the subsidiary's balances through a consolidation journal.

Mixed entity groups

There are three ways to add subsidiaries that are a different entity type to that of the Parent.  

1. Set up a dummy FRS 102 limited company and bring in the relevant balances (usually by exporting the TB from the original entity to a spreadsheet, remapping any codes that will not fall into the correct ranges, then importing the amended TB into the dummy company), as well as entering the relevant statutory database information. This would be relevant for charities that are subsidiaries, where the nominal codes and name ranges are substantially different from the FRS 102 limited equivalents.
2. Include the balances and statutory database information of the subsidiary by journals and database entries in the group itself. This is roughly equivalent to the first option, but it does not enable the user to review the separate accounts of the dummy company to ensure that all the information is correct (including whether the cash flow balances).
3. For compatible entities (eg LLPs), the entity information can be included automatically once the relevant Task Permission has been activated.  There will however be some adjustments at group level to deal with mismatches of codes, such as the need to consolidate LLP member balances which have no equivalent in a limited company. 

The Mixed Entity Group mode must be enabled by adding a Configuration key to the Central database via Maintenance > User Defined > Configuration:

AccountsCanAddAnyEntityIntoGroup     
Value = 1

This option must be enabled for each individual entity by selecting 'Mixed Entity' from the ribbon.

The Task Permission to restrict access to this option: #Client #Allow Consolidation Mixed Entity Subsidiaries

Items which do not normally need any adjustments

Items in GRP but not LLP
·        Share based payments
·        Directors’ balances, remuneration, pensions and compensation
·        Dividends payable
·        Deferred tax
·        Corporation tax
·        Some cash flow hedging reclassifications
·        Other investment 6990 and 7660
·        Share capital postings, Equity reserve, Share premium reserve, Capital redemption reserve, Own shares reserve
·        Held for sale balances
·        Redeemable preference shares

Items appearing in both GRP and LLP in a compatible manner
Most P&L items (those that don't totally align, eg former members' pensions, are correctly allocated by the revised LLP name ranges)
Actuarial gains             5210..5229
Revaluation reserve        9720..9734
Other reserves 1, 2, 3    9745..974Z, 9750..9754, 9755..975Z
Hedging reserve             9760-976Z

Items in LLP which will need to be reallocated by the user

These will need to be allocated by journals in the group, based on the specific circumstances of the LLP.

Members' remuneration
5000 - 5049    Members' remuneration (This will have double entry into 9551, 9552 and 9609.)
- These codes are included as part of the name range REOTH (Other equity).

Members’ capital and loans
LLP has separate ranges for the various types of members' balances:
Members capital - classified as debt 9500..9539
Members' loans 9540..9589
Members' other amounts 9590..9639
Members' capital - equity 9640..969Z
- These codes are included as part of the name range REOTH (Other equity) or REBFWD (Other equity b/fwd).

Therefore, the LLP reserves, as brought into the group, are:
REBFWD = 9500+9540+9590+9640
RE = 0001..599Z+REBFWD
REOTH =   5140..520Z transfers & other movements
                +5240..529Z unused codes
                +5351..599Z unused codes & suspense
                +5001..5099 members' remuneration
                +9501..953Z+9541..958Z+9591..963Z+9641..968Z movements on the various members’ balances (noted above)

Acquisitions during the year

When an entity is acquired during the year, only the values after the date of acquisition should form part of the consolidated accounts. This is not done automatically by the software and the full year's figures will be consolidated.

The figures required can be achieved by using a consolidation journal to remove the pre-acquisition balances.  

In addition, you must adjust the assets of the Subsidiary entity to reflect their fair value as at the date of Acquisition (eg, the cost of plant and machinery at the date of acquisition would be shown as Additions through business combination, and additions after this would be shown as ordinary additions). This can be entered as a consolidating adjustment.

Non-coterminous financial years

The directors of a parent entity must ensure, except where there are good reasons to the contrary, that the financial years of the parent and subsidiary undertakings coincide.

The Group master pack will not permit the inclusion of a subsidiary that does not have the same year end as the parent. However, this can be achieved by adjusting the subsidiary's period end dates to agree to the parent's.  Once the group financial statements have been prepared, the subsidiary's year end date can be amended for the purposes of printing its own financial statements.

The user will also need to consider whether the changes taking place between the parent's and subsidiary's period ends would materially affect the view given by the consolidated accounts. If so, they will need to be adjusted for in the preparation of the consolidated accounts. This can be carried out by consolidation journals.

Alternatively, the user can duplicate the subsidiary client, creating one with a period end that matches the parent.

To duplicate the client:

• Export the full client.
• Import the client with a different code.
• Change the period ends.
• Use this as the Subsidiary that is added to the list in the group structure.
• Either make the adjustments required within the client, or as a consolidation adjustment.

Joint ventures

In group accounts, an investor that is a parent must use the equity method to account for jointly controlled entities.  (FRS 102, section 15).  There are nominal codes set up for JVs and areas in the statutory database for data input.

Foreign currency translation

Each asset, liability, revenue or cost arising from a transaction denominated in a foreign currency, should be translated into the local currency at the exchange rate in operation on the date on which the transaction occurred. This will be done outside of CCH Accounts Production.

There exists a Currency translation reserve for recording and disclosing of gains and losses which are not taken directly to profit or loss.