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We comment on the new draft SORP for Investment Trust Companies and Venture Capital Trusts

  • AIC SORP Response - March 2014 Image

19 Mar 2014

We have published our comment letter on The Association of Investment Companies’ (AIC’s) Exposure Draft (ED) Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ("the draft SORP"). Overall we support the proposals.

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.

Our key comments are as follows:

  • We believe that the guidance with regard to presenting total comprehensive income will encourage consistency in the sector.  However, we disagree with the proposed guidance to label a single statement as the ‘income statement’ as this is a defined term.
  • Paragraph 39A includes requirements that do not appear to be consistent with the requirements of Section 11 of FRS 102.  We recommend that the draft SORP clarify that the effective interest rate method, without any adjustments, is the basis for calculating the yield on the instrument. 

Our full comment letter can be downloaded here.

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