The Consultative Committee of Accountancy Bodies (CCAB) has issued for comment a draft Statement of Recommended Practice (SORP) on accounting for limited liability partnerships (LLPs).
This is the fourth edition of the SORP entitled Accounting by Limited Liability Partnerships, which updates the one of 31 March 2010.
The need to review the SORP comes after earlier this year the UK Financial Reporting Council (FRC) issued FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland.
Effective 1 January 2015, FRS 102 replaces the UK GAAP regime and will apply not only to non-listed companies but to all entities that should prepare financial statement, including financial institutions and charities.
In a statement CCAB said the underlying purpose of the SORP is to ensure that LLPs present financial statements that are comparable with those of limited companies.
"LLPs are a popular corporate vehicle for many small and medium-sized enterprises. The SORP has long established accounting practices for such bodies and ensures accountability and comparability. It now needs updating to bring it into line with the requirements of FRS 102," the CCAB SORP LLPs steering group chairman Andrew Vials said.
CCAB chairman Anthony Harbinson said that many of the proposed changes are straight forward and will not affect existing practice.
Harbinson added that other changes "such as the updated guidance on business combinations, group accounts, contractual or constructive obligations and annuities are more substantive".
According to the draft these substantive changes to SORP 2010 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.
- 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.
- Updating references throughout to reflect the introduction of the option to produce a single statement of comprehensive income, including adding an additional exhibit in appendix.
CCAB is recognised as a SORP-making body by the FRC. The five CCAB’s members are the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Institute of Chartered Accountants in Ireland, the Association of Chartered Certified Accountants and the Chartered Institute of Public Finance and Accountancy.
The deadline to comment on the SORP is 10 January 2014