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IMA issues new SORP for UK Authorised Funds

  • UKGAAP Image

21 May 2014

The Investment Management Association (IMA) has published a revised Statement of Recommended Practice (SORP) for the preparation of financial statements by UK authorised funds (“the revised SORP”).

SORPS issued by the IMA apply to UK authorised funds 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 within which authorised funds operate.

The revised SORP updates the previous SORP to include the requirements of FRS 100 ‘Application of Financial Reporting Requirements’ and FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'; two of the three main standards that were introduced as a package to replace UK GAAP.  The revised SORP includes:

  • New disclosures about the methods to determine fair value;
  • Revised disclosures about the risks to which funds are exposed; and
  • Simplified guidance for the recognition of debt security interest.  The revised SORP permits a choice of methodologies and would still allow the use of the effective interest rate method.

The revised SORP also includes a number of specific requirements aimed at non-UCITS (Undertakings for Collective Investment in Transferable Securities) funds introduced as a result of the Alternative Investment Fund Managers Directive (AIMFD) in July 2013.  The revised SORP includes an appendix as to how to apply the requirements in the context of FRS 102 including a requirement to disclose gains and losses that are realised separately to those that are unrealised in the notes to the statement of total return. 

Additionally the revised SORP includes a new format to present performance and charges in the ‘comparative table” required by the Financial Conduct Authority (FCA) regulations (the Collective Investment Schemes sourcebook).  

The Financial Conduct Authority’s (FCA’s) rules currently require authorised funds to prepare their financial statements in accordance with the 2010 edition of the SORP.  It is expected that that the FCA will propose amendments in order to permit a choice of using either the 2010 or the 2014 edition of the SORP for a transitional period and then to require that the 2014 edition is used for accounting periods beginning on or after 1 January 2015.  The transitional provisions are not expected to apply to the comparative table requirements which are expected to be required from an earlier date to be set by the FCA.   

Click for the link to the Investment Manager Association website (includes links to the revised SORP, feedback statement on the invitation to comment and frequently asked questions on the revised SORP).

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