The UK should take the option to exempt subsidiaries from the requirements of the 4th Directive as permitted by Article 57. Simpler requirements for the content and audit of subsidiary accounts could then be set.

Subsidiaries are, by definition, controlled by their group, and much of the information contained in their financial statements is of little use. One of the conditions for taking the exemption from the Directive is that the parent undertakes to guarantee the commitments of the subsidiary, which will protect creditors. All of the shareholders have to agree, which protects minority shareholders. By meeting the conditions, groups could save significant amounts on the preparation and audit of subsidiary financial statements.

Why is this idea important?

Previously, the argument against taking this option has been that few parent companies would be expected to provide a guarantee to their subsidiaries. However, given the potential cost savings, I believe that the option should be made available to them.

Leave a Reply

Your email address will not be published.