CCAB issues new LLP SORP

The Consultative Committee of Accounting Bodies (CCAB) has published a new version of the statement of recommended practice for limited liability partnerships.

The LLP SORP, as it is known by those who use it, has been going through the exposure and consultation process on amendments that were made necessary by the move to the new financial reporting regime that will come into effect for UK and Irish SMEs from 1 January 2015.

Like FRS 102 and its companion reporting standards, the LLP SORP will apply from the same date to ensure LLP accounts are consistent with the new UK GAAP.

Dealing with specialist entities will inevitably throw up different challenges than limited companies, so portions of the SORP delve into areas not covered by FRS 102. The main differences include the requirement for a separate Member’s report and the presentation of the assets and liabilities attributable to members on the face of the balance sheet.

Since entities do not have shares, the SORP stipulates the presentation changes in different categories of equity and the rights and preferences related to each.  A reconciliation of the movement in members’ interests analysed between Members’ other interests’ and ‘Loans and other debts due to members’, with comparative figures, is also required.

The SORP includes a model balance sheet to aid in the compilation of records that comply with Companies Act requirements.

In addition to the complexities of reporting members’ interests in full, the LLP SORP requires the accounts to disclose the partnership’s policy on members’ drawings and whether transfers are equity or debt that is repayable. Large and medium-size LLPs will also have to report their average member numbers during the year and the profit (including remuneration) attributable to the member with the largest share, if the entitlement exceeds £200,000. The identity of this member need not be disclosed.

A significant portion of the new document is devoted to updating guidance on “contractual or constructive obligations and annuities” to reflect the requirements of FRS 102 and FRS 103 on accounting for members’ post-retirement benefits (a decision-making flow chart is included at paragraph 76B).

In his recent update on UK GAAP, Steve Collings highlighted a number of other features of the LLP SORP, including:

  • Updating the guidance on business combinations and group accounts to reflect that FRS 102 only allows the use of merger accounting for group reconstructions
  • Inclusion of the option to produce a single statement of comprehensive income.
  • Offering more guidance on the way the cash flow statement is presented in order to reduce divergent practices.