New SORP published for Investment Trust Companies and Venture Capital Trusts

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08 Jan, 2015

The Association of Investment Companies (AIC) has published a revised Statement of Recommended Practice (“the revised SORP”) setting out revised guidance on the accounting for Investment Trust Companies (ITCs) and Venture Capital Trusts (VCTs) (“investment companies”) in the UK. The revised SORP is a replacement for the previous SORP issued in January 2009.

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 revised SORP updates the previous SORP (link to AIC website) 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 included in the revised SORP include:

  • A recommendation to present total comprehensive income for the period as a single statement as permitted under FRS 102.
  • 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.
  • No requirement to prepare consolidated financial statements where an investment company only has subsidiaries held as part of an investment portfolio.

The revised SORP is 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.

The revised SORP can be obtained from the AIC website, here.

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