TABLE OF CONTENTS The consolidation of subsidiaries and quasi-subsidiaries is a large subject, but the good news is that the fundamental mechanics involved in the preparation of group accounts remains the same under UK and international GAAP. However bear traps do remain such as differences in the definition of a subsidiary, and it is these we need to tackle if misunderstandings are to be avoided.
In 2004 the definition of a subsidiary under the UK Companies Act 1985 was amended with the result that some of the disparity between UK and international recognition of this investment type was narrowed. However, differences remain.
Subsidiary status is applicable if from the perspective of the parent any of the following apply:
It holds a majority of the voting rights in the undertaking.
It is a member of the undertaking and has the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all, or substantially all, matters.
It has the right to exercise dominant influence over the undertaking.
by virtue of provisions contained in the undertaking's Memorandum or Articles
by virtue of a control contract. The control contract must be in writing and of a kind authorized by the Memorandum or Articles of the controlled undertaking. It must also be permitted by the law under which that undertaking is established.
It is a member of the undertaking and controls alone, pursuant to an agreement with other shareholders...
