Finance Leasing Manual - FLM49.09

FRS2 and the Companies Acts

FRS 2 provides much more detailed guidance than the Companies Acts. Paragraph 1 of the Standard explains that the purpose of consolidated financial statements is to present financial information about a parent undertaking and its subsidiary undertakings as a single economic entity to show the economic resources controlled by the group, the obligations of the group and the results it achieves with those resources. In other words, consolidated accounts are supposed to the show the results which would follow if the group consisted of one company instead of separate entities.

FRS 2 is drafted in terms of the Companies Act but it applies to all parent undertakings which prepare consolidated financial statements intended to give a true and fair view of the group: paragraph 18 of FRS 2. A footnote to paragraph 1 of FRS 2 explains that the Standard uses the term 'financial statements' to mean the same as the term 'accounts' used in the Companies Acts.