10 disclosures that practitioners get wrong

Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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Over the years financial statements have become increasingly longer due to the more extensive disclosure notes that are needed to comply with both the Companies Act 2006 and many complicated accounting standards, explains Steve Collings.

It is understandable why many firms (including sole practitioners) may get a disclosure note incorrect, or even miss it completely and this article aims to flag up 10 of the most common disclosures that are frequently missed or included in the financial statements incorrectly.

1.       Charitable donations

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By JAADAMS
29th Mar 2012 17:05

Additional reasons for rejection

According to Companies House the main reason for rejection is of accounts that do not contain the correct statements. These statements are required for small companies, small and dormant companies not requiring an audit, medium companies and LLP accounts.  If the Companies House webfiling service (or a bespoke software programme) is being used then this will not be a problem as there is a ‘cross box’ under the Balance Sheet section which indicates the correct statement to use.

 For the correct statements see

http://www.companieshouse.gov.uk/about/pdf/commonAccountsRejections.pdf (pages 3 to 6)

But there are still some companies who use paper submission and rejection is more likely as they have no computer software acting as a reminder.

Companies House also receives many duplicate accounts - making two copies instead of one. Presumably because the person preparing the accounts has ‘brought forward’ last years accounts as a template for the current year and then forgotten to change the dates - this is possible even if using the web- based version.

Companies Act 2006 gave Companies House specific powers regarding filing requirements. For example s444 requires that the Balance sheet and Directors report must state the name of the person who signed them on behalf of the Board and the Balance sheet itself must be signed. S1086 requires that the company number be displayed in a prominent position in one of the signed pages. Again not a problem if the web based system is being used.

Jennifer Adams

Assistant Editor Accountingweb

 

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29th Mar 2012 17:21

Disclosure disagreements
This particular article resonates with me because we were told by our professional body that we had to make a statement in the accounts that not there were no recognised gains and losses other than in the P and L account. This article quite clearly says you don't and also points you to the authority.

We have also had accounts rejected by Companies House for not making the right statements but that was due to our software provider and their wording. Yet they will accept all other sorts of nonsense that doesn't actually balance! Makes you wonder who the rules actually apply to.

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By eddybee
30th Mar 2012 12:21

Deja vu

I used to be a technical partner in a medium sized firm, but left conventional practice 8 years ago. It seems things haven't changed much!!

Regarding the statement of recognised gains and losses point; if my memory serves me correct FRS 3 requires a statement to say there are no recognised gains and losses other than in the P and L account whereas the FRSSE doesn’t require the statement.

 

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30th Mar 2012 13:57

in practice/reality

You can file just about any rubbish at companies house, with all of the above missing and more.

There are many such examples!

Companies house are not concerned and regard themselves as only a filing organisation, neither are HMRC..

The FRC are only concerned if the company in question is a Ftse 350 company or larger

And none of the criminal offences mentioned in the companies act are ever enforced.

It is all a bit of a waste of time and energy given that only professionals, who are not allowed to be associated with misleading (non - compliant) accounts, have to apply.

Making us uncompetitive in the market place....cheers

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By Old Greying Accountant
30th Mar 2012 16:47

Expand please?

7.       Operating leases

When a client has operating leases (in particular where they rent premises), disclosure should be made in the financial statements of the operating leases falling due within one year, the second to fifth year and more than five years, split as follows:

 

 

Land and other buildings

Operating leases

Within one year              

X

X

Within two to five years               

X

X

More than five years

X

X

  

 

What is shown in each cell?

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30th Mar 2012 17:45

Yes !

Old Greying Accountant wrote:

7.       Operating leases

When a client has operating leases (in particular where they rent premises), disclosure should be made in the financial statements of the operating leases falling due within one year, the second to fifth year and more than five years, split as follows:

 

 

Land and other buildings

Operating leases

Within one year              

X

X

Within two to five years               

X

X

More than five years

X

X

  

 

What is shown in each cell?

 

what would you like the answer to be ?

 

I think its the annual commitment not the full liability

 

but now you ask it's not clear

 

FRSSE and SSAP21 require disclosure of commitments under operating leases to be analysed in relation to the date of termination.

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30th Mar 2012 19:13

Fairly obvious isn't it???

Old Greying Accountant wrote:

7.       Operating leases

When a client has operating leases (in particular where they rent premises), disclosure should be made in the financial statements of the operating leases falling due within one year, the second to fifth year and more than five years, split as follows:

 

 

Land and other buildings

Operating leases

Within one year              

X

X

Within two to five years               

X

X

More than five years

X

X

  

 

What is shown in each cell?

Annual commitments falling due within one year , 2-5 and more than 5 years. I think it's something we do all the time in practice isn't it?

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By Old Greying Accountant
31st Mar 2012 21:34

I was being facetious!

Ayesha Bham wrote:
Old Greying Accountant wrote:

7.       Operating leases

When a client has operating leases (in particular where they rent premises), disclosure should be made in the financial statements of the operating leases falling due within one year, the second to fifth year and more than five years, split as follows:

 

 

Land and other buildings

Operating leases

Within one year              

X

X

Within two to five years               

X

X

More than five years

X

X

  

 

What is shown in each cell?

Annual commitments falling due within one year , 2-5 and more than 5 years. I think it's something we do all the time in practice isn't it?

Sorry Steve, seeing as the article is about errors by practioners and this comment was not written clearly!

 

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30th Mar 2012 16:50

True and Fair View

Ultimately accounts should show a "TRUE AND FAIR VIEW". This is particularly relevant where asset values have changing values. For example the value of a pub is generally based upon its proven historical profitability. Falling profitability means a lower value. A lower value may reflect adversly upon the level of borrowing. It is not unkown for accounts to show asset values greater than retail trading would support, hence those accounts do not show a true and fair view.

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30th Mar 2012 17:33

Departure from accounting standards

You can depart from accounting standards if it is necessary to show a true and fair view.

Pub values ? Presumably if you have revalued you carry out an impairment review otherwise they would be recorded at historical cost less depreciation ?

Don't ever revalue so forgive if I have misunderstood.

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30th Mar 2012 20:01

Clarity

Hi

Apologies if it wasn't clear about the operating lease disclosure and what exactly needs to be disclosed. Articles on disclosure issues are intended to be more a 'gentle reminder' of what should be disclosed. However, for clarity purposes, paragraph 7.17 of the FRSSE (effective April 2008) on page 56 states:

In respect of operating leases, the lessee shall disclose the payments that it is committed to make during the next year, analysed into those in which the commitment expires within that year, those expiring in the second to fifth years inclusive, and those expiring over five years from the balance sheet date.

Regards

Steve

 

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By Tosie
31st Mar 2012 07:42

what to do about it

I have to confess to ommitting Def, tax on a revaluation on 2011 accountsalready filed with both companies house and hmrc. Small company not requiring audit. .

I assume from the heading of this article that I am not alone problem is how and when to correct.

Any advice welcome.

Many thanks

 

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By Old Greying Accountant
31st Mar 2012 21:31

I would add though ...

... that for most of us on here, all these disclosures are largely irrelevant as they are only seen by directors/shareholders (generally the same people), the filed sets being abbreviated versions without most of this s...e on them. OK, the full set may go to the bank but they generally just file them without even looking at anything more than the Balance Sheet and P&L.

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02nd Apr 2012 14:35

quite so OGA

100% agreement

i am now turning a delicate shade of silver!

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02nd Apr 2012 16:30

Err

Does No.2 on the list apply to payments made by the company to personal pension schemes of the directors or just payments to company pension schemes?

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03rd Apr 2012 13:13

operating leases

In respect of the operating leases disclosure, I believe there is a difference between SSAP 21 and the FRSSE.

 

SSAP 21 requires the disclosure as outlined above, with the annual commitments split between land & buildings and other, whereas the FRSSE only requires the total annual commitment by year of expiry.

 

Most of my clients, especially those with an international background, do not understand or appreciate this disclosre.  Preferring more the finance lease type disclosure of total amounts payable under the lease.

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03rd Apr 2012 13:45

LCD

Perhaps in the interests of votes and simplification we need to prepare accounts that an 11 year old with no training can understand. Or think they understand ? if that makes sense.

perhaps a blank sheet of paper with the words...... No answer is wrong !

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05th Apr 2012 13:38

Disclosures are necessary
To avoid any problems when it comes to your JMU or QAD visit (whatever they're called these days). I remember my old firm getting into terrible trouble over wrong disclosures. Flippancy should be avoided at all costs as the fines are significant! Plus don't we have a duty to our clients to prepare accounts that give a true and fair view? To me that includes getting disclosure notes correct no matter how pointless one may view them.

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09th Apr 2012 09:44

Not signing your accounts

Hi 

This is a very interesting piece .

I think as well as disclosures , we should also be looking at the highest reason accounts are actually rejected .

I was at the ICB  Scottish Conference at Holyrood  on the 28th March 2012.  We had an excellent presentation from the Business Liaison Officer Neil Butler for Companies House ,who also works closely with Jack Mansfield (Accountancy Profession Liaison) and cover this area of online filing in detail.

The highest reason for the accounts to be rejected is that that they have not been signed by the director.

It left the room in shock , as I think most accountants would have regarded this as basic.  I wanted to make sure I was not mis hearing , so I questioned Neil Bulter to confirm which he did .  

It would be very interesting if AW could follow this up.

Kind regards Sarah Douglas. Douglas Accountancy and Bookkeeping Services , Glasgow 

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09th Apr 2012 10:27

signing accounts

sarah douglas wrote:

 

The highest reason for the accounts to be rejected is that that they have not been signed by the director.

It left the room in shock , as I think most accountants would have regarded this as basic.  I wanted to make sure I was not mis hearing , so I questioned Neil Bulter to confirm which he did .  

It would be very interesting if AW could follow this up.

Kind regards Sarah Douglas. Douglas Accountancy and Bookkeeping Services , Glasgow 

That may be for completely unsigned accounts.....but anybody can sign the accounts (not because it is allowed by the companies act) but because companies house don't mind if non directors are shown and sign the accounts instead.

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09th Apr 2012 11:02

Signing Accounts

Hi 

Just to clarify .  Neil Bulter said at the Scottish Conference, that forgetting to sign is no.1 reason submissions were  rejected at Companies House. 

Surely to send accounts signed is one of the most basic of  rules.   It is one of the first things you learnt at school if you studied accountancy.  

 

But I would still love if AW could do some detailed research in to this as clearly, many members here I think would actually be interested.

Perhaps AW could could contact Neil Bulter or Jack Mansfield from Companies House directly for the exact figures.

Kind Regards Sarah Douglas Douglas Accountancy and Bookkeeping Services Glasgow

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By DMGbus
09th Apr 2012 11:42

More Co's House rejection reasons

In the early days of the current regime of filing accounts at Companies House there were two very common rejection reasons, somewhat jobsworthy but that's the way it sometimes goes with "public servants"...

# Blue ink (rather than black ink) - I don't know if Companies House still enforce this one (presumably accept the accounts if nowhere near the filing deadline, but reject them if very close to the filing deadline).

# Company Number to be stated on signature page for Balance Sheet (as opposed to previous OK to have on just cover page).  I recall this requiring adding the company number to the continuation page where the Balance Sheet plus director's declaration extended to two pages.

 

These two niggling issues are eliminated by online filing as are certain other excuses for rejection. 

 

 

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