The Consultative Committee of Accountancy Bodies (CCAB) has published a revised Statement of Recommended Practice (SORP) setting out a new framework for accounting by Limited Liability Partnerships (LLPs) say Harris & Co accountants Northampton #accountantsnorthampton
The fourth edition of the SORP on Accounting by Limited Liability Partnerships (LLPs) has been updated to reflect the requirements of FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland and has been approved by the Financial Reporting Council (FRC).
Changes include updating the guidance on business combinations and group accounts to reflect the fact that FRS 102 only allows merger accounting to be used for group reconstructions and some public benefit entity combinations; updating the guidance on contractual or constructive obligations and annuities to reflect the fact that FRS 102’s requirements relating to financial liabilities differ from current UK GAAP requirements; and updating references throughout to reflect the introduction of the option to produce a single statement of comprehensive income.
The update also clarifies areas of the previous 2010 SORP which gave rise to ‘known issues or misunderstandings’. This includes clarifying the requirements in relation to automatic division of profits to make it clear that payment is unavoidable where profits are automatically divided among members in accordance with the LLP agreement in force at the time, and that in such instances a liability should be recognised.
The new SORP makes clear that if a reconciliation of members’ interests is to be shown as a primary statement in place of the statement of changes in equity then comparatives must be shown for all figures presented, and provides more guidance on cash flow statement presentation to reduce divergent practices.
Under the new regulations, LLPs will not be required to produce a separate Members’ Report, but the CCAB notes that ‘LLPs may still wish to produce a Members’ Report, but the SORP now allows them to include these disclosures elsewhere in the financial statements if they prefer.’
The revised SORP will be effective for accounting periods beginning on or after 1 January 2015 and earlier, if an entity chooses to early adopt FRS 102. Details are available here.
The members of the CCAB are ICAEW, ICAS, the Institute of Chartered Accountants in Ireland (ICAI), ACCA, and CIPFA. The FRC has approved the CCAB as the recognised SORP-making body for issuing a recognised SORP for LLPs incorporated in Great Britain under the Limited Liability Partnerships Act 2000.