Table Of ContentThe Concise Guide
to
Accounting Standards
The Concise Guide
to
Accounting Standards
Second edition
Roy Dodge FCCA
SPRINGER-SCIENCE+BUSINESS MEDIA B.V.
First edition 1988
Second edition 1991
© 1988, 1991 R. Dodge
Originally published by Chapman and Hall in 1991
Typeset in 10/llpt Palatino by Columns of Reading
Printed and bound in Great Britain by
T.J. Press (Padstow) Ltd, Padstow, Cornwall
ISBN 978-0-412-39610-6
All rights reserved. No part of this book may be
reproduced or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise,
or stored in any retrieval system of any nature, without the
written permission of the copyright holder and the publisher,
application for which shall be made to the publisher.
British Library Cataloguing in Publication Data
Dodge, Roy
The concise guide to accounting standards.
1. Accounting. Standards
1. Title
657.0218
ISBN 978-0-412-39610-6
Library of Congress Cataloging-in-Publication Data
Dodge, Roy.
The concise guide to accounting standards / Roy Dodge. -
2nd ed.
p. cm.
Includes index.
ISBN 978-0-412-39610-6 ISBN 978-1-4899-7096-1 (eBook)
DOI 10.1007/978-1-4899-7096-1
1. Accounting-Standards-Great Britain. I. Title
HF5616.G7D64 1990
657' .021841-dc20 90-2289
C1P
Contents
Preface vii
Abbreviations and references ix
The impact of SSAPs on examinations xi
Using the guide xiii
A change of policy XVll
Sources and acknowledgements xxiii
SSAP Overview xxv
Students' SSAP checklist xl
SSAP 1 Accounting for associated companies 1
SSAP 2 Disclosure of accounting policies 7
SSAP 3 Earnings per share 13
SSAP 4 The accounting treatment of government grants 21
SSAP 5 Accounting for value added tax 25
SSAP 6 Extraordinary items and prior year adjustments 29
SSAP 8 The treatment of taxation under the imputation
system 37
SSAP 9 Stocks and work in progress - excluding long-term
contracts 43
SSAP 9 Stocks and work in progress - long-term contracts 51
SSAP 10 Statements of source and application of funds 59
SSAP 12 Accounting for depreciation 65
SSAP 13 Accounting for research and development 73
SSAP 14 Group accounts 79
SSAP 15 Accounting for deferred taxation 87
SSAP 16 Current cost accounting 95
SSAP 17 Accounting for post balance sheet events 101
SSAP 18 Accounting for contingencies 107
SSAP 19 Accounting for investment properties 113
SSAP 20 Foreign currency translation 119
SSAP 21 Accounting for leases and hire purchase contracts 127
SSAP 22 Accounting for goodwill 141
SSAP 23 Accounting for acguisitions and mergers 151
SSAP 24 Accounting for pension costs 159
vi COlllcll1s
Improving examination performance on SSAPs 165
Appendix 1 Examples from published accounts 167
Appendix 2 Harmonization of international and UK standards 171
Appendix 3 A summary of the latest debate on inflation
accounting 173
Index 179
Preface
This guide contains a collection of key facts, comments and illustrations
on each SSAP.
I originally conceived it as an examination note book for students. As
it turned out, the system which I eventually used to catalogue the
notes enabled me (or maybe forced me) to produce a more
comprehensive book without abandoning my original aim of keeping
the work concise. In its final form the guide has many uses.
First it could be used by anyone who wants to find factual
information on any SSAP quickly without having to wade through a
mass of words in the SSAP itself. This could be the busy practitioner
using it as a first source of reference or lecturers and students
embroiled in a classroom discussion. The system of cross-referencing,
together with the interpretive comments included, should enable users
to reach a well informed conclusion on any line of enquiry.
It could certainly be used as a companion guide to the more
traditional forms of study text which are popular with students. And
there is no reason, except that it is not written in normal text book
style, why it should not be used for unaided study. It might take a
certain amount of courage and self-reliance to use it this way, but it can
be done.
The section called 'Using the Guide' explains how it can be used
either as basis for study or for revision. There is also a section at the
end called 'Improving Examination Performance'. This is specifically
related to answering questions on SSAPs rather than dealing with
examination technique in general.
An attempt has been made to analyse each SSAP under seven main
headings most of which have a regular system of sub-headings. The
nature of certain SSAPs precludes this universal analysis, although a
degree of uniformity has been achieved throughout the work. Most
headings are self-explanatory and should enable the user to distinguish
points of comment and interpretation from those which are factual
summary of the SSAP itself.
Comments under the main headings of 'Background' and 'Interesting
Points' have, for the most part, been written with anormal sentence
viii Prefacr
structure since the reason for including them was to help students with
the discursive aspects of their studies. Those wh ich come under the
prescriptive sections such as 'Definitions' and 'The Standard' tend to
be in precis form and sometimes these will only make sense if read in
the context of their own particular sub-heading.
The points summarized under 'Developing the Standard' are mainly
based on the explanatory notes to the SSAP. These are particularly
important for students since they usually contain a discussion of the
concepts as weIl as abrief outline of the standard being adopted.
The illustrations have been included to give meaning to some of the
more ambiguous points in the standard and to help with related areas
in accounting practice. Some are very simple. Others deal with
complex issues by using simple facts so that the principles can be seen
more clearly. Some, particularly those dealing with the more recent
SSAPs, may appear to be crammed with detail, but anyone taking the
trouble to work through them will soon find that only the essentials
have been included.
Apart from the notes and illustrations the book contains various
sections which students may find useful. There is a commentary on the
general state of the SSAP programme, an SSAP overview which
provides a summary of the key points in each SSAP, some examples of
accounting policies from published accounts and a table showing the
state of harmonization between SSAPs and lASs.
In view of the renewed interest being shown by examiners in
accounting for the effects of inflation, notes on the defunct SSAP 16
have been retained. I have also provided an additional commentary on
inflation accounting in Appendix 3. This includes an illustrated
comparison between HCA, CCA, CPP, and Real Terms accounting.
Abbreviations and references
An attempt has been made to avoid using too many abbreviations.
Those whieh are used are either so much apart of the accountant's
everyday language as to be widely understood or their full meaning
was introduced earlier in the relevant text. The following are included:
ACT - Advance corporation tax
ASB - Accounting Standards Board
ASC - Accounting Standards Committee
ASSC - Accounting Standards Steering Committee
CA - Companies Act
CCA - Current cost accounting (or accounts)
OTI - Oepartment of Trade and Industry
EO - Exposure draft
HCA - Historie cost accounting (or accounts)
lAS - International Accounting Standard
ICAEW - Institute of Chartered Accountants in England and Wales
Sch. - Schedule
Sec. - Section
At the time of putting the finishing touches to this second edition,
the work of the ASC was being transferred to the new Accounting
Standards Board (ASB). It should be obvious from the context in which
the abbreviation ASC has been used, as to whether such reference
should be construed as relating to the new ASB.
The impact of SSAPs on examinations
One of the difficulties facing the present generation of accountancy
students is how to cope with the growing maze of accounting
regulations and official pronouncements which provide a constant flow
of material for the examiners.
Foremost amongst these regulations are the Statements of Standard
Accounting Practice issued by the Accounting Standards Committee.
Each additional SSAP not only creates a new and separable topic of its
own but usually has connecting links with other regulations, concepts
and working rules. At the time of writing this first edition there have
been twenty-four standards issued over the course of twenty years.
Two of these (SSAPs 7 and 11) were aborted shortly after their
publication and one (SSAP 16) has been withdrawn although it remains
'an authoritative reference on accounting under the current cost
convention' .
There is some comfort in knowing that the proliferation of
accounting standards in the UK has not taken on anything like the
proportions found in the USA. Furthermore we see m to have reached a
point where the initial surge of issues in UK has died down and future
growth in SSAPs will be slow. The ASC have indicated that the
majority of future pronouncements are likely to be in the form of
Statements of Recommended Practice (SORPs) and revisions to existing
standards.
Even so, there is already a substantial bulk for students to contend
with and I cannot understand why examiners in the professional
bodies have not yet mooted the idea of letting students take the actual
SSAPs into the examination room. Questions which require a student
to do little more than restate the contents of an SSAP are not really a
test of ability. The accountant in practice has access to the SSAPs, and
he does not usually refer to them so that he can tell someone what they
say; he is probably solving a problem, and this is what students should
be learning to do.
At the moment questions on SSAPs come in various forms including
the application of principles to particular problems. One common
factor is that the student will not get very far without learning and
being able to recall the essential contents of the SSAP. But this is only a
