Definition
A medium-sized group is a financial classification used primarily under certain jurisdictions to define the regulatory requirements that a group of companies must follow. This classification helps in determining the necessity of consolidated financial statements and other accounting and reporting obligations. Companies or groups that fit into this category must meet two out of the following three criteria for the current financial year and the preceding year, or the two preceding financial years:
- The group’s net worth should not exceed £12.9 million net or £15.5 million gross.
- The group’s turnover should not exceed £25.9 million net or £31.1 million gross.
- The average number of employees should not exceed 250.
Examples
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Example 1: Net Worth and Employees Criteria
- Net Worth: £11 million
- Turnover: £26 million
- Number of Employees: 220
This group would be classified as medium-sized because it meets the net worth and number of employees criteria.
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Example 2: Turnover and Net Worth Criteria
- Net Worth: £14 million
- Turnover: £24 million
- Number of Employees: 270
This group would be classified as medium-sized because it fits the turnover and net worth criteria.
Frequently Asked Questions (FAQs)
Q1: Are medium-sized groups exempt from preparing consolidated financial statements?
A1: As of accounting periods beginning on or after 6 April 2008, medium-sized groups are generally not exempt from preparing consolidated financial statements, except under certain specified circumstances.
Q2: What changes were made regarding exemptions for medium-sized groups post-2008?
A2: Post-2008, the exemption that allowed medium-sized groups to avoid preparing consolidated financial statements was removed, requiring most such groups to now prepare these comprehensive reports.
Q3: How is net worth calculated for a medium-sized group?
A3: Net worth is generally calculated as total assets minus total liabilities, aligning with standard accounting definitions for evaluating a group’s financial health.
Q4: What happens if a medium-sized group exceeds the criteria in one year?
A4: If a group exceeds the criteria in one year, it must assess if it meets two of the three criteria in the following year to maintain or change its status.
Q5: Do all countries use the same criteria for medium-sized groups?
A5: No, different jurisdictions may have varying financial thresholds and criteria for defining medium-sized groups.
Related Terms
- Net Worth: The value of a company’s assets minus its liabilities.
- Turnover: The total revenue generated by a company during a specific period.
- Consolidated Financial Statements: Financial statements that provide a comprehensive overview of the financial position and performance of a group of companies as a single entity.
Online Resources
Suggested Books
- Accounting for Managers: Interpreting Accounting Information for Decision-Making by Paul M. Collier
- International Financial Reporting Standards (IFRS) 2019 by Ernst & Young
Accounting Basics: Medium-Sized Group Fundamentals Quiz
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