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Comments invited on new draft SORP for Investment Trust Companies and Venture Capital Trusts

  • UKGAAP Image

15 Jan 2014

The Association of Investment Companies (AIC), in conjunction with its SORP Working Party, has published an Exposure Draft (ED) on a revised Statement of Recommended Practice setting out revised proposals for accounting for Investment Trust Companies (ITCs) and Venture Capital Trusts (VCTs) (“investment companies”) in the UK.

SORPS issued by the AIC and their SORP Working Party apply to investment companies preparing accounts under UK GAAP to present a ‘true and fair view’ and are intended to supplement accounting standards and other legal and regulatory requirements to reflect transactions or circumstances that are unique to the sector in which they operate. 

The ED updates the previous SORP (which was issued in January 2009) to include the requirements of FRS 100 ‘Application of Financial Reporting Requirements’, FRS 101 ‘Reduced Disclosure Framework’ and FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'; the three main standards that were introduced as a package to replace UK GAAP.  Many paragraphs of the SORP have also been re-drafted to incorporate recent legislative changes which allow investment companies to distribute capital profits by way of a dividend.

Some of the most significant changes are:

  • A recommendation that investment companies present the changes in their equity in a separate statement of changes in equity.
  • No requirement for investment companies to provide a cash flow statement, subject to certain conditions.
  • Investments to be measured at fair value with changes in fair value recognised in profit or loss.
  • Investments held as part of an investment portfolio are excluded from consolidation.

It is expected that the final SORP will be effective for accounting periods beginning on or after 1 January 2015, consistent with the effective date for FRS 100, FRS 101 and FRS 102.  Early application is permitted.

Comments are invited until 19 March 2014.

The ED can be obtained from the AIC website, here.

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