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Correct disclosure note for o/s Director's loan

Director's loan disclosure under FRS 102 Sec 1A

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We have a director (and 100% shareholder) who had the following transactions with the company in chronological date order:

opening balance:  (£1k)

Funds borrowed: £50k

Dividends declared: (£100k)

Dividends paid out: £50k

Further funds borrowed: £15k

Leaving a Dr £14k balance on the director's account at the year end.

The director has paid 3% interest on the o/s loans.

Just looking for clarity on what the correct disclosure note should be. Should the disclosure note include the dividends for the part that just relates to the borrowed funds or should the full transactions be shown?

i.e. Opening balance (£1k), Advance £65k, repaid (£50k), bal c/f £14k as opposed to Opening balance (£1k), Advance £115k, repaid (£100k), bal c/f £14k

Guidance much appreciated. Thanks.

 

 

 

 

 

Replies (9)

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By atleastisoundknowledgable...
26th Jun 2019 17:37

TBH I’d just go 0, 14,0,14.

There was no need to disclose the credit balance last year, so I’d just leave it off the CY disclosure.

Remember you don’t need to name the director, you can just say ‘a director’.

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Replying to atleastisoundknowledgable...:
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By Learningvfast
26th Jun 2019 21:43

Thanks - I was wondering whether to include the ob from last year.

There was over 7 months between first loan and the dividends - would you still go 0,14,o,14 ?

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Replying to Learningvfast:
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By atleastisoundknowledgable...
27th Jun 2019 08:04

Learningvfast wrote:

- would you still go 0,14,o,14 ?

Would I - yes.
Should one - probably not.

Depends whether you want to mentally class the £50k as a director’s drawings that was then covered by a divi, or a shareholders advance of a dividend.

Personally, I would typically have as small figures as possible on that disclosure. Some auditors have corrected me, some haven’t.

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RLI
By lionofludesch
27th Jun 2019 17:13

He's borrowed £49k and then £14k later.

So £63k.

All the other funds were drawn from balances owed to him.

So I vote 0, 63, 49, 14.

Simpuls.

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Replying to lionofludesch:
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By Learningvfast
28th Jun 2019 09:45

This reflects the actual position and would make more sense as interest was paid on the monies borrowed.

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Replying to Learningvfast:
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By lionofludesch
28th Jun 2019 10:01

Sure - it's not rocket science. Folk get confused when the balance flip-flops between debit and credit but it's only the debit balances with which you need to concern yourself.

What's he paying interest for ?

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Replying to lionofludesch:
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By Learningvfast
28th Jun 2019 10:33

The company charged the director interest on the loan to avoid any BIK.

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Replying to Learningvfast:
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By lionofludesch
28th Jun 2019 12:08

Learningvfast wrote:

The company charged the director interest on the loan to avoid any BIK.

Yeah, but he's a 100% shareholder. He's paying money in that, one day, he'll be taking back out. Not to mention that the interest charge is nugatory.

But - if the numbers back you up - fine.

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By johnt27
28th Jun 2019 10:43

s413 of the Companies Act is your guiding light on this and when balances flip between DR and CR you end up having to treat the transactions separately (assuming they happened on seperate days).

So advance 1 is for £49k, subsequently repaid by the dividend. Advance 2 is for £14k, not repaid at year end. For each advance the interest rate and terms should be disclosed. You are then supposed to summarise the total transactions so would disclose advances of £63k, repayments of £49k.

It's incorrect to say that credit balances don't get disclosed under FRS 102 1A - it depends. ICAEW and FRC have issued guidance on this.

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