3.01 The Company shows nil guarantees for subsidiaries while describing bank, overdraft, pension and audit-exemption guarantees it has given
UK Company A · a UK-listed medical technology group · Regulator-style question
In brief
Company Note 6 shows '[wording masked]' as a dash in both years, and then says the Company guarantees bank liabilities and overdrafts of subsidiaries and future amounts due to the UK pension plan trustees. Company Note 9 lists six UK subsidiaries taking the section 479A audit exemption, which is available only if the Company guarantees all their outstanding liabilities at the year end. No amount, nature of the liabilities guaranteed, or statement that an outflow is remote is given.
The evidence, as filed
Screenshot withheld to protect the company’s identity: Annual Report 2025, page 270; Annual Report 2024, page 252; Annual Report 2025, page 273. Their wording or layout could lead back to the company even with names and figures masked; the evidence list below records what each page shows.
What the report shows, and what the rule requires
| What the annual report shows | What the rule requires |
|---|---|
| What the annual report shows [wording masked]: '–' (2025 and 2024); narrative: guarantees to banks, cross guarantees of overdrafts, guarantees to pension trustees; six subsidiaries claim the s.479A audit exemption; no amounts. | What the rule requires Either the amount (or maximum exposure) of the liabilities guaranteed, by type, with the s.479A guarantee identified, or a clear statement that the possibility of any outflow is remote and why the table shows nil. |
What we checked: Read Company Notes 6 and 9 in both reports against IAS 37.86 and s.479A(2)(b); compared the nil line with the narrative.
The rule
Companies Act 2006 s.479A(2)(b)
Version relied on: Companies Act 2006, revised text on legislation.gov.uk as in force for the financial year reviewed
the parent undertaking must give a guarantee under section 479C in respect of that year
IAS 37 Provisions, Contingent Liabilities and Contingent Assets, paragraph 86
Version relied on: UK-adopted international accounting standards (UK Endorsement Board), as in force for financial years beginning in or after January 2025
Unless an outflow is remote, each class of contingent liability must be described, with an estimate of its financial effect and the related uncertainties where practicable.
Why it applies here: Nil line and narrative point in different directions; the extent of the guarantees is not stated in either year.
Why it matters
Readers of the parent's accounts cannot see the extent of the obligations it has taken on for its subsidiaries.
Exposure
A question; no breach is asserted until the amounts and the remoteness judgement are known.
Our workings
in both years Company Note 6 shows a dash for [wording masked] and, directly below, says [wording masked], and has guaranteed future amounts due to the UK pension plan trustees. Company Note 9 says six UK subsidiaries will take the audit exemption in section 479A for the year.
section 479A(2)(b) makes the exemption conditional on the parent giving a guarantee under section 479C of all the subsidiary's outstanding liabilities at the year end; that guarantee exists by operation of the exemption claimed. Under its reduced disclosure framework the Company applies IAS 37, which requires each class of contingent liability to be described with an estimate of its financial effect unless the possibility of an outflow is remote; financial guarantees are also within IFRS 9 (whose disclosures the Company is exempt from). The dash may mean 'nothing recognised' or 'remote', or may simply be wrong; the narrative shows that guarantees exist. Only management knows the amounts guaranteed and whether they judge an outflow remote, so this is a question. It is low severity: the guarantees are within the group the Company controls and the subsidiaries listed are mainly holding companies.
Management’s best defence, and our reply
Management would say the guarantees support wholly owned subsidiaries whose liabilities are already in the consolidated balance sheet, that the subsidiaries are solvent and an outflow is remote, so IAS 37 requires no disclosure and the dash is correct. They would add that the parent's FRS 101 exemption from IFRS 7 removes the financial guarantee disclosures. That is a tenable reading, which is why this is a question; but the note itself says guarantees exist, and a nil line next to that narrative leaves the reader unable to tell whether the dash means 'none' or 'remote'.
The fix
- Replace the dash with the amounts guaranteed (or add: 'The directors consider the possibility of any outflow under these guarantees to be remote'), and name the section 479C guarantees given for the subsidiaries in Note 9.
Question for the company
What liabilities of subsidiaries does the Company guarantee at [date] and 2024 (bank facilities and overdrafts, pension amounts, and the section 479C guarantees for the six audit-exempt subsidiaries), what is the maximum exposure, and does the dash mean the directors judge any outflow remote?
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | The guarantees line, shown as a dash in both columns | Document | Annual Report 2025, page 270 |
| 2 | The narrative directly below says guarantees are given | Document | Annual Report 2025, page 270 |
| 3 | Pension guarantees, also unquantified | Document | Annual Report 2025, page 270 |
| 4 | Six subsidiaries claim the exemption that requires the parent's guarantee | Document | Annual Report 2025, page 273 |
| 5 | The same wording, with the same dash, in the 2024 report | Document | Annual Report 2024, page 252 |
Prepared by Pramanex from the company’s published annual reports, without the company’s involvement, to show how an annual report review reads. The company is not named, and nothing on this page is a statement about any identifiable company. Observations are not an audit, review or other assurance engagement, and not legal advice. A regulator-style question is a question, not a conclusion.
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