Companies Act 2017 – Impact on Consolidations and Abridged Accounts

The Companies (Accounting) Act 2017 was signed into law on 9 June 2017 and affects companies filing accounts for periods starting 1 January 2017.  The first wave of companies likely to be affected are companies with years ending 31 December 2017.

Consolidated Accounts

The 2017 Act has now introduced the requirement for holding companies to prepare consolidated financial statements at a lower threshold than was previously required.  While the preparation of consolidated financial statements is recommended to gain a financial understanding of a group as a whole, it will result in higher compliance costs for those companies that are now obliged to prepare and file consolidated financial statements. The old and new thresholds are set out below. The amounts specified are the combined amounts of the holding company and its subsidiaries. Companies must meet two out of three of the size criteria in relation to the current and previous financial years i.e. two consecutive years to lose or gain the status. We are seeing these new limits now bring in a lot of previously exempt groups into the requirement to consolidate.  The first year can lead to substantial costs due to the requirements to display comparative year figures and the need for a cash flow statement. Groups will have to calculate their consolidated financial position for the current year and the two previous financial years.

Section 357 guarantee

Under the previous Act, consolidated accounts could be filed in the Companies Office without the requirement to file the stand-alone financial statements of the subsidiaries if a “Section 17” guarantee was provided by the holding company.  The “Section 17” guarantee covered all the liabilities reflected in the financial statements.  “Section 357” now over-writes “Section 17” and the guarantee now covers all commitments entered, not just those reflected as liabilities.  As an example, this now incorporates future lease payments or other similar future commitments and as such is a more onerous guarantee.

Abridged Accounts

The thresholds for Small Companies has been increased as follows, again applying to companies filing accounts for periods starting 1 January 2017. Small companies remain exempt from filing a Profit and Loss Account or Directors’ Report in their Abridged Accounts. The changes brought in by the Companies Act 2017 however will lead to additional disclosure in Abridged Accounts versus under the previous requirements. All notes presented in the financial statements must now be included in the Abridged Accounts. This will result in the following information now being disclosed and available publicly:
  • Turnover
  • Exceptional items
  • Bank interest and charges
  • Taxation
  • Full fixed asset notes
  • Analysis of all debtors and creditors
  • Movement in all Reserves i.e. profits and dividends are disclosed
In summary, the Companies (Accounting) Act 2017 will result in more public access to the consolidated position for groups and key financial data of companies than under the previous filing requirements.

What questions do you have?

We are happy to help. Please post your comment below or call Paul Leonard, Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: pleonard@cooneycarey.ie

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