Accounting for CVA

Accounting for CVA

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I am preparing a set of statutory accounts for a business which has opted for a CVA during the financial year. I would like to find reference materials. Anyone came across any good resources? Please point me to the right direction. Thank you.

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Man of Kent
By Kent accountant
18th Dec 2012 23:00

Does it matter

I use VT and have prepared statutory accounts for a company that entered a CVA and from recollection the only additional disclosure (assuming it isn't an audit) was:

1. Detailed explanation given in the directors report.

2. An additional note to the accounts.

In addition full accounts rather than abbreviated accounts were filed.

However this was for the benefit of the company's creditors and not a statutory requirement.

None of the creditors captured by the CVA should be written off or provided for until the CVA has come to an end as the true liabilities will not crystallise until then.

Whilst in the CVA the number one priority is to comply with the terms (providing the business is viable) of the CVA, unless this includes disclosure requirements in year end accounts I don't think you need to do anything differently.

Anyone else got different views?

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Replying to david5541:
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By L1 Partnership
21st Feb 2013 22:45

I have been told by our auditor that we have to write off all the CVA debtors and creditors at the year end, even though the CVA has not yet finished. They said all CVA debts have to be disappeared from the balance sheet.

Your thoughts?

 

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Man of Kent
By Kent accountant
26th Feb 2013 10:44

Why

On what basis? Its impossible to quantify the true creditors balances to be written off until the CVA has run its course. The CVA proposal prepared by the Insolvency Practitioner will have been based a pence in the pound return forecast to be received by creditors over the term of the CVA.

You could create a creditor balances write off provision and that could be based on the expected return from the CVA. This provision could then be reviewed each year based on the annual report on the CVA prepared by the IP (CVA supervisor).

On what basis are the auditors saying the creditor balances should be written off in full?

Not sure why you mention debtors - the business is continuing as usual, all debts are due and are not affected by the CVA (Creditors Voluntary Arrangement).

 

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