3i backs out of consolidation standard

FTSE100 private equity group 3i has decided against adopting an international
accouting standard requiring it to consolidate its accounts.

The standard, IAS27, sets out the guidelines for preparing the financial
statements of subsidiaries and other entities.

The Financial Times reports that private equity groups, most of them
private, have resisted the requirements of the standard, but as 3i is listed the
industry has watched developments around the group closely.

3i said it had been informed by auditors Ernst & Young that it did not
need to consolidate its accounts in its November interims, and did not expect to
be challenged on its decision.

Law firm SJ Berwin told the FT it would be ‘nonsense and misleading’
for private equity groups to consolidate portfolio companies in which they hold
a majority stake.     

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Fiona Westwood of Smith and Williamson.