Finance Leasing Manual - FLM49.06

Companies Acts rules on groups

Schedule 12 FA 1997 relies on Companies Act definitions, as reinforced by FRS 2. The ASB have been concerned to get at the reality of group relationships and FRS 2 tries to take account of the substance of the relationships.

Sections 227(2)-(3) Companies Act 1985 (as amended) requires group accounts to be prepared. They are to take the form of consolidated accounts which:

'give a true and fair view of the state of affairs as at the end of the financial year, and the profit or loss for the financial year, of the undertakings included in the consolidation as a whole, so far as concerns members of the company'.

The form and content of such accounts should comply with Schedule 4A: Section 227(4) Companies Act 1985.

Underlying the Companies Act material on this topic is the EC
Seventh Directive on Company Law. Article 1(1) requires the publication of consolidated accounts and a consolidated annual report.