[CORE] Group structures, parent companies and subsidiaries, joint ventures and associated companies

Resource Checklists

Essential core learning and study resources referred to in this post:

• An introduction to group financial statemenets – elearning resource [A]
• A self study workbook on the preparation of group income statements [B]
• A worksheet on the adjustments in group financial statements for intercompany trading [C]

Additional resources:

• Why have subsidiaries [D]
• Legal definitions [E]

Almost all economically significant companies conduct their business through group structures i.e. through subsidiaries, associated companies and joint ventures. This is because there are significant operating, managerial, financial and strategic advantages by organising the enterprise in this way. The companies you will be looking at as part of your other studies and research activities will all be groups of companies. So, you really do need to understand the financial statements for these groups.

In this session we will start looking at the features of consolidated financial statements [group accounts]. We’ll look at the nature of a group, and the holding company/subsidiary relationship. We’ll see how this is based on control rather than ownership, and the consolidated financial statements that holding companies are required to prepare and publish are based on this concept of control.

You can see the online notes as an elearning resource here – essential [A]

[CORE] Directed Private Study – numerical work – group income statements

There is a printed online guide (essential [B] to the preparation of consolidated income statements. Guidance will be given in the lecture sessions as to which parts of this material you need to cover.

[CORE] Intercompany trading

There’s also a worksheet on intercompany trading – essential [C] and consolidated income statements as this can be a tricky issue for accounting students.

[CORE] There are also two additional pieces of elearning which will help you understand more fully the strategic and legal issues surrounding subsidiaries

Corporate strategy – Why have subsidiaries?

There is an online presentation [D] on why companies have subsidiaries. It lasts about 10 minutes but covers a lot in that time. You can, of course, take it at your own pace. It may appear a bit dated now, and some of the links in the resources box no longer all work, but it’s still good stuff. This material is self explanatory, so please include it in your own private study.

Legal issues – What is a subsidiary?

There is also an online presentation on what is a subsidiary [E] – again fairly good stuff, if a bit legalistic. It contains some good quizzes that will really test your understanding! The references are to the Companies Act 2006 (downloadable pdf) or here (online version).

[CORE] Two Worked Case Studies

These help you check your understanding

Have a go at Danser and Empart.

and – Brojum and Drorral.

[ADD] Video overview

Here’s a video of an online session recorded last year. You’ll need a password – it’s 83408.

Company Reports – Case Study TESCO

Tesco Annual Report 2024

You can access and download the latest corporate report of Tesco from

https://www.tescoplc.com/investors/reports-results-and-presentations/annual-report-2024

The lecture/self study notes are at http://www.ecourse.co.uk/media/tesco/presentation.pdf

Course video: Getting information about a company from Companies House: Tesco plc [CORE]

NB: You may have to use this link: https://www.gov.uk/government/organisations/companies-house

Course video: Getting information about a company from its website: Tesco plc

Preparing for Seminar 1: Worksheet exercises – private study [CORE]

There is a worksheet with three exercises based on the material covered to date. The first two are similar to each other. There is an elearning presentation on solving the first exercise – click here to access.

In addition solutions are available for all three exercises.

Please do these exercises and revise Morag Shalini (week 1 & 2) before starting your Seminar 1 exercise.

Additional directed private study [ADD]

The following tasks are intended to get you more familiar with online sources of information which will need to use carefully and critically over the course. You’ll need to use all of these selectively withdrawing significant information and deriving a view of the company’s financial performance and position which is consistent and is justified by these information sources.

• Choose a company – any UK quoted company will do.
• Do a general web search on your company’s name. What sort of information do you get? Learn how to narrow your search to, say, information relating to the past month (or year). How can this information help you, if at all?
• Locate basic legal information about the company at Companies House. How useful is this going to be? What sort of additional information is available if you need it and cannot get it elsewhere. Will it cost, and, if so, how much?
• How is you company doing on the Stock Exchange. Google Finance will help you here. Learn the basics of using the graph of the share price. Explore how to change the time period and what the little capital letters tell you. Do you recognise any of the information shown above the graph. Are investors interested in the performance of the company? Why? What sort of decisions can an investor make? Do you think investors are interested in how the company will perform or how it has performed?
• Locate the company’s website. Have a browse around. Look for and access the investor relations section. Can you find and download the latest corporate/annual report containing the financial statements. If so, download and store the document.
• Browse [generally] through the annual report. Do this just generally at the moment. What sort of information is there there? How much of it is narrative. How much numerical? How much pictorial or graphical? Which kind of information do you think is the easiest to deal with.

Do you think like an accountant? Quiz [ADD]

Try out this quiz and see how you do. This quiz will help you understand accruals accounting and the matching concept.