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ICAEW and ICAS publish exposure draft of updated guidance on realised and distributable profits under the Companies Act 2006

  • ICAEW (Institute of Chartered Accountants in England and Wales) (lt green) Image
  • ICAS (Institute of Chartered Accountants of Scotland) (lt green) Image

10 Mar 2016

The Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered Accountants of Scotland (ICAS) have jointly issued an exposure draft of revised guidance to assist companies in determining whether profits made are realised and can be paid out as dividends ("TECH 05/16 BL").

TECH 05/16 BL will, when finalised, replace TECH 02/10 Guidance on the determination of realised profits and losses in the context of distributions under the Companies Act 2006 (link to ICAEW website) which requires updating as a result of changes to International Financial Reporting Standards (IFRSs) and UK Accounting Standards (notably the introduction of Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland) and the need to provide additional guidance on a number of areas that have arisen in practice. 

Substantive changes have been made to the guidance on accounting for intragroup off-market loans and the guidance on retirement benefit schemes.  Other changes are in the nature of updating references to the revised standards and removing obsolete material.

Investors are demanding greater disclosure around distributable reserves.  Whilst not proposing changes to disclosure, the guidance will assist companies to meet investor expectations in this respect.  It will also help to avoid the potentially serious consequences for companies and their directors of making an unlawful distribution.

Comments on the proposals are requested by 9 June 2016.

The exposure draft of TECH 05/16 BL is available on the ICAEW website here.  Our Need to know publication is available here.

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