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Comments invited on updated draft SORP for Limited Liability Partnerships

  • UKGAAP Image

08 Jul 2021

The Consultative Committee of Accountancy Bodies (CCAB) has published an updated draft of its Limited Liability Partnerships (LLPs) Statement of Recommended Practice (SORP). Comments are invited until 24 September 2021.

The Financial Reporting Council (FRC) has approved the CCAB as the recognised SORP-making body for issuing a recognised SORP for LLPs incorporated in Great Britain under the Limited Liability Partnerships Act 2000. The members of the CCAB are; The Institute of Chartered Accountants in England and Wales (ICAEW), The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in Ireland (ICAI), The Association of Chartered Certified Accountants (ACCA) and The Chartered Institute of Public Finance and Accountancy (CIPFA).  

SORPS issued by CCAB apply to LLPs preparing accounts under UK GAAP to present a ‘true and fair view’.  CCAB has stated that “the underlying purpose of the SORP is to deal with issues that are specific to LLPs and ensure that, as far as possible, LLPs present financial statements that are comparable with those of other entities”. 

Updates to the LLPs SORP are proposed in response to stakeholder feedback that there is diversity in practice when interpreting whether a division of profit is automatic or discretionary in certain situations. As a result of this review CCAB is proposing:

  • Changes to the definitions included in the SORP relating to divisions of profit.
  • Further consequential amendments throughout the SORP to ensure consistency of terminology.
  • Additional guidance to help determine when an LLP has an unconditional right to avoid delivering cash or other assets to members.
  • Changes to the ordering of the SORP to ensure that the guidance on the division of profits is presented together, reduce duplication, and improve the overall flow of the document.

CCAB has also identified some diversity in practice regarding how automatic and discretionary divisions of profit are presented in the cash flow statement. To address this diversity, CCAB is proposing:

  • Additional guidance which sets out the basis for alternative classifications of cash flows relating to profit distributions.
  • A requirement for LLPs to disclose their accounting policy for classifying share of profits in the cash flow statement and that cash flows be classified consistently from period to period.

A number of other minor clarifications to the SORP are also being proposed including updates to reflect the requirement for large LLPs and groups to produce an energy and carbon report as part of their annual report.  CCAB is also in the process of considering whether amendments made to FRS 102 as a result of the UK's exit from the European Union require changes to the SORP. 

The updated SORP will be effective for accounting periods beginning on or after 1 January 2022, with early adoption permitted.

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