CFM95310 - Interest restriction: groups, periods and financial statements: the worldwide group: overview

TIOPA10/Chapter 11

The rules apply on a group wide basis, rather than company-by-company, and there are several fundamental steps that must be taken when applying the rules.

The worldwide group

The first step is to identify the worldwide group, which typically consists of the ultimate parent and all its consolidated subsidiaries.

Period of account

Once this is established, that group’s period of account must be determined. In most cases, this will simply match the period for which financial statements of the group are drawn up by the ultimate parent.

There are specific provisions for cases such as where no statements are drawn up for the group, are drawn up for a period of more than 18 months or are drawn up more than 30 months from the start of the period. In such cases a default period of account is prescribed by the legislation, although the ultimate parent may be able to elect for a different period of account to be used.

Financial statements

Once the composition of the group and the period of account is known, figures can then be extracted from the financial statements and used for the relevant calculations. Typically the provisions work by reference to amounts recognised as items of profit or loss within the group’s income statement.

There are provisions which deal with cases where no financial statements are prepared, the financial statements are not acceptable, or the set of entities consolidated in the financial statements is not exactly the same as the membership of the worldwide group. {#} {#} {#}