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HMRC internal manual

Corporate Finance Manual

Interest restriction: groups, periods and financial statements: financial statements: consolidation of wrong subsidiaries

TIOPA10/S481

Where the ultimate parent of a multi-company group has prepared consolidated financial statements, no adjustments to the scope of the consolidation will be required if this comprises the ultimate parent and all its consolidated subsidiaries.

There may be instances, however, where the accounts do not consolidate all entities in the worldwide group or where they consolidate entities that are not members of the worldwide group. This could be the case where the ultimate parent prepares accounts under a different accounting framework to international accounting standards (IAS).

The rules test the financial statements by looking at what subsidiaries would be included if consolidated accounts were prepared under IAS. Adjustments to the actual statements can then be made based on the application of this test.

Where a subsidiary would have been consolidated under IAS but is not consolidated in the actual financial statements, they are to be adjusted to consolidate the results of that entity. Likewise, where the financial statements include a subsidiary which would not be consolidated under IAS, they are to be adjusted to exclude the results of that subsidiary.