Table Of ContentGAAP2000
UK financial reporting and accounting
GAAP2000
UK financial reporting and accounting
by
Ken Wild
Brian Creighton
and the
Deloitte & Touche technical department
Deloitte &
Touche
www.deloitte.co. uk
Accountancy Books Palgrave Macmillan
40 Bernard Street
London WC1N 1LD
Tel: 0171 920 8991
Fax: 0171 920 8992
Email: [email protected]. uk
Website: www.icaew.co. uk/books.htm
© 1999 Deloitte & Touche
Softcover reprint of the hardcover 1st edition 1999 978-0-333-80137-6
All rights reserved.
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Permission to reproduce such material cannot be granted by the
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British Library Cataloguing-in-Publication Data
Wild, Ken
GAAP 2000 : UK financial reporting
!.Financial statements -Great Britain - Standards
I. Title II.Creighton, Brian III.Simmonds, Andy
657.3'021841
ISBN 978-1-349-15083-0 ISBN 978-1-349-15081-6 (eBook)
DOl 10.1007/978-1-349-15081-6
0333801393 (Student edition)
Typeset by York House Typographic, Ealing, London
IV
Foreword by Sir David Tweedie
Looking through this book I was rather shaken by the way in which the
accounting for most of the subjects covered has changed (or is in the process
of being changed) since the institution of the Accounting Standards Board.
At the beginning of the 1990s there was undue attention paid to the 'bottom
line' which was easily manipulable, frequently by the use of extraordinary
items or by the so-called 'sale of assets' which, in essence, never left the com
pany. There were so many assets and liabilities off the balance sheet that to
some it seemed that the statement was rather an optional extra as it was
hardly worth showing what was left. Some companies deferred expenses
treating them as assets while others did not seem to know the difference
between 'debt' and 'equity'.
This book outlines the way in which accounting has changed since the Board's
formation. It outlines the Board's approach, beginning with the Statement of
Principles, and now resulting in the control of the profit and loss account by
ensuring that only real assets and real liabilities can be shown on the balance
sheet and explains these fundamental changes to the reader.
When we at the ASB set standards we do not try to deal with every single sit
uation. We try to set what we call 80 per cent standards, that is we will deal
with 80 per cent of the problem and can perhaps accomplish that objective in
50 or 60 pages. If we were required to deal with 95 per cent of the problem we
could double or treble the size of the standard. That is the reason we aim for
the shorter statements consisting mainly of principle, leaving the remaining
20 per cent to the judgement of the finance director and auditor. If poor
judgement based on the 'where does it say I can't do that' philosophy emerges
then the Board will intervene either by amending the standard or by using the
offices of the Urgent Issues Task Force - neither of these routes have been
used with any frequency.
GAAP 2000: UK financial reporting and accounting not only outlines the
essential thrust of the Board's standards and its direction but also goes that
step further and moves into the 20 per cent area which the ASB has left alone
- clearly using the experience of the authors in dealing with the accounting
problems of the firm's clients.
This book is based on sound practical experience and will save many a rash
enthusiast from getting into unnecessary difficulty.
v
Foreword
The idea of a world where accounting can be simple and transparent is enor
mously attractive. It is an idea which lies behind current pressures to 'glob
alise', to achieve a coming together of reporting principles in all major
jurisdictions. The ASB's standards are increasingly influencing, and being
influenced by, the pronouncements of other national and international stan
dard-setters. The process of achieving a set of globally accepted standards will
however be anything but simple, and could well introduce additional com
plexity on the way. As we move forward, a manual like GAAP 2000 will be a
lifesaver to the hard-pressed company accountant and the equally hard
pressed auditor. As the financial world becomes more complex so too do the
ways of accounting for the new transactions - an understanding, given by this
book, of the direction in which both UK and international accounting is
moving will be invaluable in dealing with novel situations. I wish every user
of this manual safe passage through the uncharted waters ahead.
Sir David Tweedie
June 1999
Vl
Acknowledgements
The associate authors from the Deloitte & Touche Technical Department who
contributed to this book were Georgette Bailey, Phil Barden, Keith Billing,
Elizabeth Buckley, Margaret Cassidy, Sasha Dorofeyev, Haydn Everitt, Martyn
Jones, Veronica Poole, Andy Simmonds, Robert Stenhouse and Gillian
Sutherland. Our thanks are also extended to Gary Romain for his assistance.
vii
Contents
Page
Foreward by Sir David Tweedie v
Acknowledgements Vll
Table of Financial Reporting Standards xli
Table of Statements of Standard Accounting Practice xlix
Table of Urgent Issue Task Force Abstracts li
Table of Statutes liii
Table of Statutory Instruments lix
I Introduction
1.1 Purpose of the manual 1
1.2 How to use the manual 1
1.4 Contents of this edition 2
1.5 Small companies 2
1.6 Specialised industry practice 2
1.7 References and abbreviations used 3
1.10 Disclosure checklist 3
2 Accounting requirements and their enforcement
2.1 Sources of accounting requirements 5
2.1 Introduction 5
2.2 Mandatory sources 5
2.4 Advisory sources 6
2.5 Legal requirements 6
2.5 The Companies Act 6
2.6 Accounting standards 7
2.6 Introduction 7
2.8 Scope and authority 7
2.10 Disclosure of compliance 7
2.11 Urgent Issues Task Force 8
2.11 Introduction 8
2.12 UITF Abstracts 8
2.14 Enforcement of accounting requirements 8
2.14 Introduction 8
2.16 Enforcement by the Secretary of State 9
2.17 Enforcement by The Financial Reporting Review Panel 9
ix
Contents
3 The Accounting Standards Board's Statement of Principles
3.I Introduction 11
3.I Background, purpose and status 11
3.4 Chapters of the Statement of Principles I2
3.4 Introduction I2
3.5 The objective of financial statements (chapter I) I2
3.6 The reporting entity (chapter 2) I2
3.7 The qualitative characteristics of financial information
(chapter 3) I2
3.8 The elements of financial statements (chapter 4) I2
3.9 Recognition in financial statements (chapterS) 13
3.13 Measurement in financial statements (chapter 6) I3
3.I4 Presentation of financial information (chapter 7) I4
3.IS Accounting for interests in other entities (chapter 8) I4
4 Preparation, filing and publishing of financial statements
4.I Rules for preparing and filing financial statements IS
4.I Preparation of accounts IS
4.2 Presentation of company name IS
4.4 Approval and signing of financial statements IS
4.IO Persons entitled to receive copies of accounts and
reports I6
4.I2 Laying of accounts and reports at the annual general
meeting I7
4.14 Delivery of accounts and reports to the Registrar 17
4.I9 Time limits for laying and delivering accounts and
reports 18
4.24 Exemptions given to small and medium-sized
companies 20
4.27 Revision of defective accounts 20
4.32 Requirements of subsidiary companies 2I
4.32 Introduction 21
4.33 Additional disclosures required by the Act 2I
4.39 Additional disclosures required by accounting standards 23
4.40 Exemptions from statutory disclosures 23
4.42 Exemptions from accounting standards 24
4.43 Requirements of companies limited by guarantee 24
4.43 Definition 24
4.44 Requirements to prepare and file accounts 24
4.47 Requirements of unlimited companies 2S
4.47 Definition 2S
4.49 Requirements to prepare and file accounts 2S
4.SI Dormant companies 26
4.S I Definition 26
4.S3 Requirements to prepare and file accounts 26
X
Contents
4.58 Conditions for passing the special resolution 27
4.63 Ceasing to be dormant 29
4.66 Non-trading companies 30
4.67 Agency companies 30
4. 72 Nominee companies 31
4.73 Requirements of overseas companies 32
4.73 Introduction 32
4. 78 Requirement to prepare accounts 33
4.88 Listed overseas companies 35
4.89 Requirements of qualifying partnerships 36
4.89 Introduction 36
4.89 Definitions 36
4.93 Requirements 37
4.99 Exemption 38
4.101 Transitional provisions 38
4.102 Publication of financial statements 38
4.102 Statutory and non-statutory accounts 38
4.104 Interim accounts and other statements 39
4.1 OS Rules regarding company year ends and accounting periods 40
4.1 OS Introduction 40
4.106 Definitions 40
4.113 Changes in accounting reference periods 41
5 General requirements as to financial statements
5.1 Financial statements required 43
5.1 Introduction 43
5.6 Definitions of 'financial statements' and 'accounts' 43
5.8 True and fair view 44
5.8 Companies Act requirements 44
5.13 Opinions from counsel 45
5.14 Fundamental accounting principles 45
5.14 Introduction 45
5.17 Going concern 46
5.18 Consistency 46
5.24 Prudence 47
5.29 Accruals 48
5.31 Separate determination of items 48
5.32 General rules as to form and content of financial statements 48
5.32 Introduction 48
5.38 General requirements of Schedule 4 to the Act 49
5.44 Reporting currency 51
5.44 Statutory accounts 51
5.48 Additional accounts prepared in ecus 52
5.50 Future developments 53
xi
