Group accounts are drawn up to the parent’s year end, and the starting point under FRS 102 is that every subsidiary’s figures are prepared to the same date. Where a subsidiary’s year end differs, the group either uses the subsidiary’s own accounts for a year ending no more than three months before the parent’s, adjusted for significant transactions and events in the gap, or has the subsidiary prepare interim accounts to the parent’s year end. Directors are also under a Companies Act duty to align year ends unless there are good reasons not to.

Do subsidiaries have to share the parent’s year end?

Company law expects them to. Section 390(5) of the Companies Act 2006 requires the directors of a parent company to secure that, except where in their opinion there are good reasons against it, the financial year of each of its subsidiary undertakings coincides with the parent’s own financial year. The duty sits with the parent’s directors and covers all subsidiary undertakings, including undertakings that are not companies; section 390(4) explains how their financial year is identified.

Good reasons are a matter for the directors’ opinion, but they should be able to explain them. Reasons sometimes given include a newly acquired subsidiary whose year end has not yet been changed, an overseas subsidiary whose local rules or tax year make a particular date sensible, or a business with a strongly seasonal trade where a different date gives a more meaningful stock count. Convenience for the accounts team is a weak reason on its own.

What does FRS 102 require?

Paragraph 9.16 of FRS 102 says the financial statements of the parent and its subsidiaries used in preparing the consolidated accounts are prepared as of the same reporting date, and for the same reporting period, unless it is impracticable to do so. The glossary defines impracticable as being unable to apply a requirement after making every reasonable effort to do so. Where a subsidiary’s reporting date and period differ from the parent’s, paragraph 9.16 says the consolidated accounts must be made up either:

  1. from the subsidiary’s financial statements as of its last reporting date before the parent’s reporting date, adjusted for the effects of significant transactions or events between that date and the date of the consolidated accounts, provided that reporting date is no more than three months before the parent’s; or
  2. from interim financial statements prepared by the subsidiary as at the parent’s reporting date.

Company law says the same. Paragraph 2 of Schedule 6 to SI 2008/410 requires group accounts to be drawn up as at the same date as the parent’s accounts and, where a subsidiary’s financial year ends on a different date, to be made up from its accounts for the year last ending before the parent’s year end, provided that was no more than three months earlier, or from interim accounts as at the parent’s year end.

Note the direction. The subsidiary’s date must fall before the parent’s year end. A group cannot use a subsidiary year ending a month after the parent’s, even though that would be within three months.

How does this work in practice?

Illustration only. Parent P has a 31 December 2026 year end. It has two subsidiaries.

Subsidiary Own year end Gap before 31 December 2026 What the group uses
A 30 September 2026 3 months A’s own accounts to 30 September 2026, adjusted for significant October to December items, or interim accounts to 31 December 2026
B 31 March 2026 9 months Interim accounts for B to 31 December 2026; its statutory accounts cannot be used

Suppose that in November 2026 P lent A £500,000 and A paid a dividend to P. Neither appears in A’s accounts to 30 September, but both are in P’s. Without adjustment the intragroup balances would not cancel, and paragraph 9.15 requires intragroup balances and transactions, including dividends, to be eliminated in full. These are the kind of significant transactions paragraph 9.16(a) requires the group to adjust for. Other examples are a major impairment, a large asset sale, a significant new borrowing or a business acquisition by the subsidiary in the gap period.

What has to be disclosed?

Paragraph 9.23(c) of FRS 102 requires the consolidated accounts to disclose any difference in the reporting date of the financial statements of the parent and its subsidiaries used in preparing the consolidated accounts. In practice that note names the subsidiary, gives the date used and, where the gap route applies, explains that adjustments have been made for significant transactions in the intervening period. Where subsidiary B in the illustration is consolidated from interim accounts, the figures used are at the parent’s date, so the note is about A only.

How do the international and associate rules compare?

IFRS 10 takes a similar line. Paragraph B92 requires the same reporting date and, where dates differ, additional financial information prepared to the parent’s date unless impracticable. Paragraph B93 allows the subsidiary’s most recent financial statements adjusted for significant transactions where that is impracticable, but caps the difference at three months and requires the length of the reporting periods and any difference in dates to be the same from period to period. That consistency point is good practice under FRS 102 too, because shifting the gap from year to year makes the comparative figures cover a different period.

Associates are handled less strictly. FRS 102 paragraph 14.8(f) requires the investor to use the associate’s financial statements as of the same date unless it is impracticable, in which case it uses the most recent available statements adjusted for significant transactions or events. There is no three month cap in that paragraph. See FRS 102 associates.

How can a subsidiary’s year end be brought into line?

A UK subsidiary changes its accounting reference date by notice to Companies House under section 392 of the Companies Act 2006, shortening or extending the current or previous period. Two limits usually apply: a period cannot be extended beyond 18 months (section 392(5)), and an extension is ineffective if given less than five years after an earlier extension. Section 392(3)(a) disapplies the five year restriction where a company that is a subsidiary undertaking or parent undertaking of another UK undertaking moves its date to coincide with that undertaking’s. Our page on changing a company’s year end covers the filing mechanics.

Does a different year end affect group tax?

Each company keeps its own corporation tax accounting periods, so a mismatch can complicate group relief. Sections 139, 140 and 142 of the Corporation Tax Act 2010 limit the relief to the overlapping period common to the surrendering company’s and the claimant company’s accounting periods, apportioning the losses and profits by time. A subsidiary with a 30 September year end surrendering to a parent with a 31 December year end therefore has its losses split across two of the parent’s periods. See our page on group relief for losses.

What mistakes come up most often?

  • Using a subsidiary year end that falls after the parent’s. Both FRS 102 and the Act require the subsidiary’s date to be before the parent’s.
  • Using accounts more than three months old. Anything older needs interim accounts to the parent’s date.
  • Skipping the gap adjustments. Intragroup loans, dividends and recharges in the gap are the usual cause of consolidation differences that will not clear.
  • Treating the three month route as automatic. FRS 102 paragraph 9.16 starts from the same date and period unless that is impracticable.
  • Forgetting the section 390(5) duty. If there is no good reason for the difference, the parent’s directors should be aligning the dates.
  • Not disclosing the difference. Paragraph 9.23(c) requires it. Related audit planning points are on our page on group audits.

Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.