Consolidating foreign subsidiaries uk gaap
The standard thus allows two alternative methods of translation of a foreign entity's financial statements, depending on whether the enterprise is a separate, quasi-independent entity, or rather where it represents a direct extension of the trade of the investing company.
SSAP 20 is effective for accounting periods starting on or after 1 April 1983.
If a company has ownership in subsidiaries but does not choose to include a subsidiary in complex consolidated financial statement reporting then it will usually account for the subsidiary ownership using the cost method or the equity method.
Private companies will usually make the decision to create consolidated financial statements including subsidiaries on an annual basis.
Private companies have very few requirements for financial statement reporting but public companies must report financials in line with the Financial Accounting Standards Board’s Generally Accepted Accounting Principles (GAAP).
If a company reports internationally it must also work within the guidelines laid out by the International Accounting Standards Board’s International Financial Reporting Standards (IFRS).
In general, the consolidation of financial statements requires a company to integrate and combine all of its financial accounting functions together in order to create consolidated financial statements that shows results in standard balance sheet, income statement, and cash flow statement reporting.Because the parent company and its subsidiaries form one economic entity, investors, regulators, and customers find consolidated financial statements helpful in gauging the overall position of the entire entity.There are primarily three ways to report ownership interest between companies.Consolidated financial statements report the aggregate reporting results of separate legal entities.
The final financial reporting statements remain the same in the balance sheet, income statement, and cash flow statement.The decision to file consolidated financial statements with subsidiaries is usually made on a year to year basis and often chosen because of tax or other advantages that arise.