Our key comments include:

• In our view, there is a need to define some of the terms used throughout the draft LLP SORP to ensure consistency of interpretation. In particular definitions of ‘clearly identifiable return on amounts subscribed’ and ‘members’ services’ would be helpful.
• Instead of the SORP’s requirement for LLPs to produce a separate Member’s report, currently not required by FRS 102 or legislation, we recommend moving the relevant disclosures to form part of the financial statements, where they provide necessary context for the other information presented.
• While we generally agree with the proposed business combinations accounting guidance, we have a concern about the application of the group reconstruction criteria to LLPs with no interests accounted for as equity. We believe that, in the context of LLPs with no capital accounted for as equity, the reference to ‘equity holders’ should include LLP members and the ‘rights of each equity holder’ should extend to include member profit sharing rights.
• Overall, we believe the revised guidance on contractual or constructive obligations and annuities adequately reflects the requirements of FRS 102 and FRS 103 in relation to accounting for members’ post-retirement benefits. However the introduction of some additional clarifications and definitions would be useful. In particular we believe further clarification is required of the interaction of the FRS 102 definition of ‘puttable instruments’ and the LLP SORP definition of ‘post-retirement payments to members’ to avoid a potential conflict in application of the accounting guidelines to some situations.

In addition, the CCAB have asked a specific question on the need to retain the FRS 25 application flowcharts in the appendix to the LLP SORP. We agree with the CCAB that the flowcharts were always intended only as an illustrative guidance and to the extent they are not used by preparers their continued inclusion within the SORP is not warranted. We therefore agree with the removal of the flowcharts provided that the body of the SORP reflects all the principles necessary for accounting analysis.

While we agree with the CCAB that in many instances the basic accounting remains unchanged, there is one specific scenario where we envisage the application of the FRS 102 requirements to result in a different classification of members’ interests, in relation to the application of the ‘puttables exception’. For example, LLPs where members provide services, have automatic division of all profits and have their interest puttable on retirement would previously have had no equity, but would now be required to classify capital as equity under FRS 102. We therefore recommend providing an example illustrating the new treatment and highlighting the change from the old accounting requirements.

Further comments and full response to all questions raised in the invitation to comment are contained within the full comment letter.