Residential management company rules issued as UITF goes

In one of its final acts, the Urgent Issues Taskforce (UITF) issued new guidance on financial reporting for residential management companies.

The guidance contained in UITF abstract 92 should be adopted for financial periods ending after 31 December 2012, includes help on:

  • How residential management companies can determine whether they are acting as principal or agent when undertaking residential service transactions with third parties, and thereby determine which transactions should be recognised in their financial statements;
  • Focus on and protect the needs of users of RMC financial statements (including tenants); and
  • Assist preparers in fulfilling their statutory duties.

The dearth of definitive guidance for preparing residential management companies accounts has exercised AccountingWEB members operating in this sector for some time and the UITF provoked a swift response in Any Answers, where members debated whether the UITF had lost its way on the topic.

In a subsequent post, Dreamcatcher wanted to clarify the situation for a management company with a year end of 30 June, but a freehold lease requiring service charge accounts to be prepared to 31 March.

Continued...

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Comments

Abstract 92 - UITF parting shot    1 thanks

leon0001 | | Permalink

The abstract is worse than useless. It does not provide clear guidance for use in the vast majority of such cases where the freehold is owned by the RMC and the lessees are usually but not always the members.

The statutory trust is a bit of a red herring - who is the alleged beneficial owner of the money paid on account of future expenditure, the person who pays it in or a subsequent lessee after the flat is sold? Did ICAEW's counsel give any guidance on this? Was he or she asked?

How many of these companies only handle expenditure of less than £1,000 per annum?

I think that the ICAEW TR and this abstract should be immediately withdrawn and the matter looked at from scratch, preferably seconding some accountants who have extensive experience of dealing with small RMC's.

I hope I am not being too uncharitable when I say it appears that the UITF were suffering from end of term syndrome or just demob happy when they issued this vague tosh.

Paul Scholes's picture

Least worst solution    1 thanks

Paul Scholes | | Permalink

Given the confusion & conflicts in this topic over the past couple of decades I think this shaves off some rough edges and provides a bit of clarity as far as the RMC is concerned.

Where I feel it may fall down is in giving the impression that by including the expenditure and corresponding income (thus leaving a breakeven) in the P&L the RMC accounts provide the full information leaseholders might expect, or be entitled to, in the handling of the service charge funds.  In other words that there is now no need to prepare service charge accounts or top-up information.

I agree with others that such information can be incorporated as a note or appendix to the company's accounts, hopefully for the same year end.

 

EDIT: Leon, I hope you've taken advantage of the extended consultation period.  This was never about a complete solution, like it or not the L&T Act from 25 years ago has created a trust for all leasees, both current & future and this has, in some people's minds created a conflict with the accounting in the RMC itself a separate legal entity, which must prepare its own accounts.  So the abstract is just trying to bring some clarity over what, if anything, to include in the company's accounts.

 

Paul Scholes's picture

email link refused

Paul Scholes | | Permalink

John - the email link at the end of the article has just been refused as invalid?

EDIT:  Whoops sorry, refused my end not theirs!

Least worst, I don't think so.

leon0001 | | Permalink

Better that they just left well alone. No guidance at all is better than confusing, scattered time confusing "guidance".

And yes, I have submitted my comment to Ms Guest.

John?Does this article fall

uktaxpal | | Permalink

John?Does this article fall into the category of taking credit for somebody elses work without giving credit.Original article http://www.accountingweb.co.uk/anyanswers/question/have-uitf-lost-their-way-rmc-accounts

@Leon0001 This is the most common sense article ive seen.