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The Companies (Northern Ireland) Order 1986

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Point in time view as at 01/01/2006.

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PART IN.I.INDIVIDUAL ACCOUNTS

CHAPTER IN.I.GENERAL RULES AND FORMATS

SECTION AN.I.GENERAL RULES

1.  (1)  Subject to the following provisions of this Part:

(a)every balance sheet of a company shall show the items listed in the balance sheet format set out in section B of this Chapter; and

(b)every profit and loss account of a company shall show the items listed in either of the profit and loss account formats so set out;

in either case in the order and under the headings and sub-headings given in the format adopted.

(2) Sub-paragraph (1) is not to be read as requiring the heading or sub-heading for any item to be distinguished by any number or letter assigned to that item in the format adopted.

(3) Where the heading of an item in the format adopted contains any wording in square brackets, that wording may be omitted if not applicable to the company.

2.  (1)  Where in accordance with paragraph 1 a company's profit and loss account for any financial year has been prepared by reference to one of the formats set out in section B, the directors of the company shall adopt the same format in preparing the profit and loss account for subsequent financial years of the company unless in their opinion there are special reasons for a change.

(2) Particulars of any change in the format adopted in preparing a company's profit and loss account in accordance with paragraph 1 shall be disclosed, and the reasons for the change shall be explained, in a note to the accounts in which the new format is first adopted.

3.  (1)  Any item required in accordance with paragraph 1 to be shown in a company's balance sheet or profit and loss account may be shown in greater detail than so required.

(2) A company's balance sheet or profit and loss account may include an item representing or covering the amount of any asset or liability, income or expenditure not specifically covered by any of the items listed in the balance sheet format provided or the profit and loss account format adopted, but the following shall not be treated as assets in any company's balance sheet:

(i)preliminary expenses;

(ii)expenses of and commission on any issue of shares or debentures; and

(iii)costs of research.

(3) Items to which lower case letters are assigned in any of the formats set out in section B may be combined in a company's accounts for any financial year if either:

(a)their individual amounts are not material for the purpose of giving a true and fair view; or

(b)the combination facilitates the assessment of the state of affairs or profit or loss of the company for that year;

but in a case within head (b) the individual amounts of any items so combined shall be disclosed in a note to the accounts and any notes required by this Schedule to the items so combined shall, notwithstanding the combination, be given.

(4) Subject to paragraph 4(3), a heading or sub-heading corresponding to an item listed in the balance sheet format or the profit and loss account format adopted in preparing a company's balance sheet or profit and loss account shall not be included if there is no amount to be shown for that item in respect of the financial year to which the balance sheet or profit and loss account relates.

4.  (1)  In respect of every item shown in the balance sheet or profit and loss account, there shall be shown or stated the corresponding amount for the financial year immediately preceding that to which the accounts relate.

(2) Where the corresponding amount is not comparable with the amount to be shown for the item in question in respect of the financial year to which the balance sheet or profit and loss account relates, the former amount shall be adjusted and particulars of the adjustment and the reasons for it shall be given in a note to the accounts.

(3) Paragraph 3(4) does not apply in any case where an amount can be shown for the item in question in respect of the financial year immediately preceding that to which the balance sheet or profit and loss account relates, and that amount shall be shown under the heading or sub-heading required by paragraph 1 for that item.

5.  (1)  Subject to the following provisions of this paragraph and without prejudice to note (6) to the balance sheet format, amounts in respect of items representing assets or income may not be set off against amounts in respect of items representing liabilities or expenditure (as the case may be), or vice versa.

(2) Charges required to be included in profit and loss account format 1, items 11(a) and 11(b) or format 2, items A7(a) and A7(b) may however be set off against income required to be included in format 1, items 12(a) and 12(b) or format 2, items B5(a) and B5(b) and the resulting figure shown as a single item (in format 2 at position A7 if negative and at position B5 if positive).

(3) Charges required to be included in profit and loss account format 1, item 13 or format 2, item A8 may also set off against income required to be included in format 1, item 14 or format 2, item B6 and the resulting figure shown as a single item (in format 2 at position A8 if negative and at position B6 if positive).

6.  (1)  Assets shall be shown under the relevant balance sheet headings even where the company has pledged them as security for its own liabilities or for those of third parties or has otherwise assigned them as security to third parties.

(2) A company shall not include in its balance sheet assets pledged or otherwise assigned to it as security unless such assets are in the form of cash in the hands of the company.

7.  Assets acquired in the name of and on behalf of third parties shall not be shown in the balance sheet.

Para. 8 rep. by SR 2004/496

SECTION BN.I.THE REQUIRED FORMATS FOR ACCOUNTS

PreliminaryN.I.

9.  (1)  References in this Part to the balance sheet format or to profit and loss account formats are to the balance sheet format or profit and loss account formats set out below and references to the items listed in any of the formats are to those items read together with any of the notes following the formats which apply to any of those items.

(2) The requirement imposed by paragraph 1 of this Part to show the items listed in any such format in the order adopted in the format is subject to any provision in the notes following the formats for alternative positions for any particular items.

10.  A number in brackets following any item in any of the formats set out below is a reference to the note of that number in the notes following the formats.

Balance Sheet FormatN.I.

ASSETS

1.  Cash and balances at central [or post office] banks (1)

2.  Treasury bills and other eligible bills (20)

(a) Treasury bills and similar securities (2)

(b) Other eligible bills (3)

3.  Loans and advances to banks (4), (20)

(a) Repayable on demand

(b) Other loans and advances

4.  Loans and advances to customers (5), (20)

5.  Debt securities [and other fixed income securities] (6), (20)

(a) Issued by public bodies

(b) Issued by other issuers

6.  Equity shares [and other variable-yield securities]

7.  Participating interests

8.  Shares in group undertakings

9.  Intangible fixed assets (7)

10.  Tangible fixed assets (8)

11.  Called up capital not paid (9)

12.  Own Shares (10)

13.  Other assets

14.  Called up capital not paid (9)

15.  Prepayments and accrued income

Total assets

LIABILITIES

1.  Deposits by banks (11), (20)

(a)Repayable on demand

(b)With agreed maturity dates or periods of notice

2.  Customer accounts (12), (20)

(a)Repayable on demand

(b)With agreed maturity dates or periods of notice

3.  Debt securities in issue (13), (20)

(a)Bonds and medium term notes

(b)Others

4.  Other liabilities

5.  Accruals and deferred income

6.  [F1Provisions for liabilities]

(a)Provisions for pensions and similar obligations

(b)Provisions for tax

(c)Other provisions

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F1SR 2004/496

7.  Subordinated liabilities (14), (20)

8.  Called up share capital (15)

9.  Share premium account

10.  Reserves

(a)Capital redemption reserve

(b)Reserve for own shares

(c)Reserves provided for by the articles of association

(d)Other reserves

11.  Revaluation reserve

12.  Profit and loss account

Total liabilities

MEMORANDUM ITEMS

1.  Contingent liabilities (16)

(1) Acceptances and endorsements

(2) Guarantees and assets pledged as collateral security (17)

(3) Other contingent liabilities

2.  Commitments (18)

(1) Commitments arising out of sale and option to resell transactions (19)

(2) Other commitments

Notes on the balance sheet format and memorandum itemsN.I.

(1)  Cash and balances at central [or post office] banks

(Assets item 1)

Cash shall comprise all currency including foreign notes and coins.

Only those balances which may be withdrawn without notice and which are deposited with central or post office banks of the country or countries in which the company is established shall be included in this item. All other claims on central or post office banks must be shown under Assets items 3 or 4.

(2)  Treasury bills and other eligible bills: Treasury bills and similar securities

(Assets item 2(a))

Treasury bills and similar securities shall comprise treasury bills and similar debt instruments issued by public bodies which are eligible for refinancing with central banks of the country or countries in which the company is established. Any treasury bills or similar debt instruments not so eligible shall be included under Assets item 5, sub-item (a).

(3)  Treasury bills and other eligible bills: Other eligible bills

(Assets item 2(b))

Other eligible bills shall comprise all bills purchased to the extent that they are eligible, under national law, for refinancing with the central banks of the country or countries in which the company is established.

(4)  Loans and advances to banks

(Assets item 3)

Loans and advances to banks shall comprise all loans and advances to domestic or foreign credit institutions made by the company arising out of banking transactions. However, loans and advances to credit institutions represented by debt securities or other fixed income securities shall be included under Assets item 5 and not this item.

(5)  Loans and advances to customers

(Assets item 4)

Loans and advances to customers shall comprise all types of assets in the form of claims on domestic and foreign customers other than credit institutions. However, loans and advances represented by debt securities or other fixed income securities shall be included under Assets item 5 and not this item.

(6)  Debt securities [and other fixed income securities]

(Assets item 5)

This item shall comprise transferable debt securities and any other transferable fixed income securities issued by credit institutions, other undertakings or public bodies. Debt securities and other fixed income securities issued by public bodies shall however only be included in this item if they may not be shown under Assets item 2.

Where a company holds its own debt securities these shall not be included under this item but shall be deducted from Liabilities item 3(a) or (b), as appropriate.

Securities bearing interest rates that vary in accordance with specific factors, for example the interest rate on the inter-bank market or on the Euromarket, shall also be regarded as fixed income securities to be included under this item.

(7)  Intangible fixed assets

(Assets item 9)

This item shall comprise:

(a)

development costs;

(b)

concessions, patents, licences, trade marks and similar rights and assets;

(c)

goodwill; and

(d)

payments on account.

Amounts shall, however, be included in respect of (b) only if the assets were acquired for valuable consideration or the assets in question were created by the company itself.

Amounts representing goodwill shall only be included to the extent that the goodwill was acquired for valuable consideration.

There shall be disclosed, in a note to the accounts, the amount of any goodwill included in this item.

(8)  Tangible fixed assets

(Assets item 10)

This item shall comprise:

  • —land and buildings;

  • —plant and machinery;

  • —fixtures and fittings, tools and equipment; and

  • —payments on account and assets in the course of construction.

There shall be disclosed in a note to the accounts the amount included in this item with respect to land and buildings occupied by the company for its own activities.

(9)  Called up capital not paid

(Assets items 11 and 14)

The two positions shown for this item are alternatives.

(10)  Own shares

(Assets item 12)

The nominal value of the shares held shall be shown separately under this item.

(11)  Deposits by banks

(Liabilities item 1)

Deposits by banks shall comprise all amounts arising out of banking transactions owed to other domestic or foreign credit institutions by the company. However liabilities in the form of debt securities and any liabilities for which transferable certificates have been issued shall be included under Liabilities item 3 and not this item.

(12)  Customer accounts

(Liabilities item 2)

This item shall comprise all amounts owed to creditors that are not credit institutions. However liabilities in the form of debt securities and any liabilities for which transferable certificates have been issued shall be shown under Liabilities item 3 and not this item.

(13)  Debt securities in issue

(Liabilities item 3)

This item shall include both debt securities and debts for which transferable certificates have been issued, including liabilities arising out of own acceptances and promissory notes. (Only acceptances which a company has issued for its own refinancing and in respect of which it is the first party liable shall be treated as own acceptances.)

(14)  Subordinated liabilities

(Liabilities item 7)

This item shall comprise all liabilities in respect of which there is a contractual obligation that, in the event of winding up or bankruptcy, they are to be repaid only after the claims of other creditors have been met. This item shall include all subordinated liabilities, whether or not a ranking has been agreed between the subordinated creditors concerned.

(15)  Called up share capital

(Liabilities item 8)

The amount of allotted share capital and the amount of called up share capital which has been paid up shall be shown separately.

(16)  Contingent liabilities

(Memorandum item 1)

This item shall include all transactions whereby the company has underwritten the obligations of a third party.

Liabilities arising out of the endorsement of rediscounted bills shall be included in this item. Acceptances other than own acceptances shall also be included.

(17)  Contingent liabilities: Guarantees and assets pledged as collateral security

(Memorandum item 1(2))

This item shall include all guarantee obligations incurred and assets pledged as collateral security on behalf of third parties, particularly in respect of sureties and irrevocable letters of credit.

(18)  Commitments

(Memorandum item 2)

This item shall include every irrevocable commitment which could give rise to a credit risk.

(19)  Commitments: Commitments arising out of sale and option to resell transactions

(Memorandum item 2(1))

This sub-item shall comprise commitments entered into by the company in the context of sale and option to resell transactions.

(20)  Claims on, and liabilities to, undertakings in which a participating interest is held or group undertakings

(Assets items 2 to 5, Liabilities items 1 to 3 and 7)

The following information must be given either by way of subdivision of the relevant items or by way of notes to the accounts.

The amount of the following must be shown for each of Assets items 2 to 5:

(a)

claims on group undertakings included therein; and

(b)

claims on undertakings in which the company has a participating interest included therein.

The amount of the following must be shown for each of Liabilities items 1, 2, 3 and 7:

(i)

liabilities to group undertakings included therein; and

(ii)

liabilities to undertakings in which the company has a participating interest included therein.

Special RulesN.I.

Subordinated assetsN.I.

11.  (1)  The amount of any assets that are subordinated must be shown either as a subdivision of any relevant asset item or in the notes to the accounts; in the latter case disclosure shall be by reference to the relevant asset item or items in which the assets are included.

(2) In the case of Assets items 2 to 5 in the balance sheet format, the amounts required to be shown by note (20) to the format as sub-items of those items shall be further subdivided so as to show the amount of any claims included therein that are subordinated.

(3) For this purpose, assets are subordinated if there is a contractual obligation to the effect that, in the event of winding up or bankruptcy, they are to be repaid only after the claims of other creditors have been met, whether or not a ranking has been agreed between the subordinated creditors concerned.

Syndicated loansN.I.

12.  (1)  Where a company is a party to a syndicated loan transaction the company shall include only that part of the total loan which it itself has funded.

(2) Where a company is a party to a syndicated loan transaction and has agreed to reimburse (in whole or in part) any other party to the syndicate any funds advanced by that party or any interest thereon upon the occurrence of any event, including the default of the borrower, any additional liability by reason of such a guarantee shall be included as a contingent liability in Memorandum item 1, sub-item (2).

Sale and repurchase transactionsN.I.

13.  (1)  The following rules apply where a company is a party to a sale and repurchase transaction.

(2) Where the company is the transferor of the assets under the transaction:

(a)the assets transferred shall, notwithstanding the transfer, be included in its balance sheet;

(b)the purchase price received by it shall be included in its balance sheet as an amount owed to the transferee; and

(c)the value of the assets transferred shall be disclosed in a note to its accounts.

(3) Where the company is the transferee of the assets under the transaction it shall not include the assets transferred in its balance sheet but the purchase price paid by it to the transferor shall be so included as an amount owed by the transferor.

Sale and option to resell transactionsN.I.

14.  (1)  The following rules apply where a company is a party to a sale and option to resell transaction.

(2) Where the company is the transferor of the assets under the transaction it shall not include in its balance sheet the assets transferred but it shall enter under Memorandum item 2 an amount equal to the price agreed in the event of repurchase.

(3) Where the company is the transferee of the assets under the transaction it shall include those assets in its balance sheet.

Managed fundsN.I.

15.  (1)  For the purposes of this paragraph “managed funds” are funds which the company administers in its own name but on behalf of others and to which it has legal title.

(2) The company shall, in any case where claims and obligations arising in respect of managed funds fall to be treated as claims and obligations of the company, adopt the following accounting treatment: claims and obligations representing managed funds are to be included in the company's balance sheet, with the notes to the accounts disclosing the total amount included with respect to such assets and liabilities in the balance sheet and showing the amount included under each relevant balance sheet item in respect of such assets or (as the case may be) liabilities.

Profit and Loss Account FormatsN.I.

FORMAT 1N.I.

Vertical layout

1.  Interest receivable (1)

(1) Interest receivable and similar income arising from debt securities [and other fixed income securities]

(2) Other interest receivable and similar income

2.  Interest payable (2)

3.  Dividend income

(a)Income from equity shares [and other variable-yield securities]

(b)Income from participating interests

(c)Income from shares in group undertakings

4.  Fees and commissions receivable (3)

5.  Fees and commissions payable (4)

6.  Dealing [profits] [losses] (5)

7.  Other operating income

8.  Administrative expenses

(a)Staff costs

(i)Wages and salaries

(ii)Social security costs

(iii)Other pension costs

(b)Other administrative expenses

9.  Depreciation and amortisation (6)

10.  Other operating charges

11.  Provisions

(a)Provisions for bad and doubtful debts (7)

(b)Provisions for contingent liabilities and commitments (8)

12.  Adjustments to provisions

(a)Adjustments to provisions for bad and doubtful debts (9)

(b)Adjustments to provisions for contingent liabilities and commitments (10)

13.  Amounts written off fixed asset investments (11)

14.  Adjustments to amounts written off fixed asset investments (12)

15.  [Profit] [loss] on ordinary activities before tax

16.  Tax on [profit] [loss] on ordinary activities

17.  [Profit] [loss] on ordinary activities after tax

18.  Extraordinary income

19.  Extraordinary charges

20.  Extraordinary [profit] [loss]

21.  Tax on extraordinary [profit] [loss]

22.  Extraordinary [profit] [loss] after tax

23.  Other taxes not shown under the preceding items

24.  [Profit] [loss] for the financial year

FORMAT 2N.I.

Horizontal layout

A.  Charges

1. Interest payable (2)

2. Fees and commissions payable (4)

3. Dealing losses (5)

4. Administrative expenses

(a)Staff costs

(i)Wages and salaries

(ii)Social security costs

(iii)Other pension costs

(b)Other administrative expenses

5. Depreciation and amortisation (6)

6. Other operating charges

7. Provisions

(a)Provisions for bad and doubtful debts (7)

(b)Provisions for contingent liabilities and commitments (8)

8. Amounts written off fixed asset investments (11)

9. Profit on ordinary activities before tax

10. Tax on [profit] [loss] on ordinary activities

11. Profit on ordinary activities after tax

12. Extraordinary charges

13. Tax on extraordinary [profit] [loss]

14. Extraordinary loss after tax

15. Other taxes not shown under the preceding items

16. Profit for the financial year

B.  Income

1. Interest receivable (1)

(1)Interest receivable and similar income arising from debt securities [and other fixed income securities]

(2)Other interest receivable and similar income

2. Dividend income

(a)Income from equity shares [and other variable-yield securities]

(b)Income from participating interests

(c)Income from shares in group undertakings

3. Fees and commissions receivable (3)

4. Dealing profits (5)

5. Adjustments to provisions

(a)Adjustments to provisions for bad and doubtful debts (9)

(b)Adjustments to provisions for contingent liabilities and commitments (10)

6. Adjustments to amounts written off fixed asset investments (12)

7. Other operating income

8. Loss on ordinary activities before tax

9. Loss on ordinary activities after tax

10. Extraordinary income

11. Extraordinary profit after tax

12. Loss for the financial year

Notes on the profit and loss account formatsN.I.

(1)  Interest receivable

(Format 1, item 1; Format 2, item B1)

This item shall include all income arising out of banking activities, including:

(a)

income from assets, included in Assets items 1 to 5 in the balance sheet format, however calculated;

(b)

income resulting from covered forward contracts spread over the actual duration of the contract and similar in nature to interest; and

(c)

fees and commissions receivable similar in nature to interest and calculated on a time basis or by reference to the amount of the claim (but not other fees and commissions receivable).

(2)  Interest payable

(Format 1, item 2; Format 2, item A1)

This item shall include all expenditure arising out of banking activities, including:

(a)

charges arising out of liabilities included in Liabilities items 1, 2, 3 and 7 in the balance sheet format, however calculated;

(b)

charges resulting from covered forward contracts, spread over the actual duration of the contract and similar in nature to interest; and

(c)

fees and commissions payable similar in nature to interest and calculated on a time basis or by reference to the amount of the liability (but not other fees and commissions payable).

(3)  Fees and commissions receivable

(Format 1, item 4; Format 2, item B3)

Fees and commissions receivable shall comprise income in respect of all services supplied by the company to third parties, but not fees or commissions required to be included under interest receivable (Format 1, item 1; Format 2, item B1).

In particular the following fees and commissions receivable must be included (unless required to be included under interest receivable):

fees and commissions for guarantees, loan administration on behalf of other lenders and securities transactions;

fees, commissions and other income in respect of payment transactions, account administration charges and commissions for the safe custody and administration of securities;

fees and commissions for foreign currency transactions and for the sale and purchase of coin and precious metals; and

fees and commissions charged for brokerage services in connection with savings and insurance contracts and loans.

(4)  Fees and commissions payable

(Format 1, item 5; Format 2, item A2)

Fees and commissions payable shall comprise charges for all services rendered to the company by third parties but not fees or commissions required to be included under interest payable (Format 1, item 2; Format 2, item A1).

In particular the following fees and commissions payable must be included (unless required to be included under interest payable):

fees and commissions for guarantees, loan administration and securities transactions;

fees, commissions and other charges in respect of payment transactions, account administration charges and commissions for the safe custody and administration of securities;

fees and commissions for foreign currency transactions and for the sale and purchase of coin and precious metals; and

fees and commissions for brokerage services in connection with savings and insurance contracts and loans.

(5)  Dealing [profits] [losses]

(Format 1, item 6; Format 2, items B4 and A3)

This item shall comprise:

(a)

the net profit or net loss on transactions in securities which are not held as financial fixed assets together with amounts written off or written back with respect to such securities, including amounts written off or written back as a result of the application of paragraph 34(1);

(b)

the net profit or loss on exchange activities, save in so far as the profit or loss is included in interest receivable or interest payable (Format 1, items 1 or 2; Format 2, items B1 or A1); and

(c)

the net profits and losses on other dealing operations involving financial instruments including precious metals.

(6)  Depreciation and amortisation

(Format 1, item 9; Format 2, item A5)

This item shall comprise depreciation and other amounts written off in respect of balance sheet Assets items 9 and 10.

(7)  Provisions: Provisions for bad and doubtful debts

(Format 1, item 11(a); Format 2, item A7(a))

Provisions for bad and doubtful debts shall comprise charges for amounts written off and for provisions made in respect of loans and advances shown under balance sheet Assets items 3 and 4.

(8)  Provisions: Provisions for contingent liabilities and commitments

(Format 1, item 11(b); Format 2, item A7(b))

This item shall comprise charges for provisions for contingent liabilities and commitments of a type which would, if not provided for, be shown under Memorandum items 1 and 2.

(9)  Adjustments to provisions: Adjustments to provisions for bad and doubtful debts

(Format 1, item 12(a); Format 2, item B5(a))

This item shall include credits from the recovery of loans that have been written off, from other advances written back following earlier write offs and from the reduction of provisions previously made with respect to loans and advances.

(10)  Adjustments to provisions: Adjustments to provisions for contingent liabilities and commitments

(Format 1, item 12(b); Format 2, item B5(b))

This item comprises credits from the reduction of provisions previously made with respect to contingent liabilities and commitments.

(11)  Amounts written off fixed asset investments

(Format 1, item 13; Format 2, item A8)

Amounts written off fixed asset investments shall comprise amounts written off in respect of assets which are transferable securities held as financial fixed assets, participating interests and shares in group undertakings and which are included in Assets items 5 to 8 in the balance sheet format.

(12)  Adjustments to amounts written off fixed asset investments

(Format 1, item 14; Format 2, item B6)

Adjustments to amounts written off fixed asset investments shall include amounts written back following earlier write offs and provisions in respect of assets which are transferable securities held as financial fixed assets, participating interests and group undertakings and which are included in Assets items 5 to 8 in the balance sheet format.

CHAPTER IIN.I.ACCOUNTING PRINCIPLES AND RULES

SECTION AN.I.ACCOUNTING PRINCIPLES

16.  Subject to paragraph 22, the amounts to be included in respect of all items shown in a company's accounts shall be determined in accordance with the principles set out in paragraphs 17 to 21.

Accounting principlesN.I.

17.  The company shall be presumed to be carrying on business as a going concern.

18.  Accounting policies shall be applied consistently within the same accounts and from one financial year to the next.

19.  The amount of any item shall be determined on a prudent basis, and in particular:

(a)only profits realised at the balance sheet date shall be included in the profit and loss account; and

(b)all liabilitiesF2. . . which have arisenF2. . . in respect of the financial year to which the accounts relate or a previous financial year shall be taken into account, including those which only become apparent between the balance sheet date and the date on which it is signed on behalf of the board of directors in pursuance of Article 241.

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F2SR 2004/496

20.  All income and charges relating to the financial year to which the accounts relate shall be taken into account, without regard to the date of receipt or payment.

21.  In determining the aggregate amount of any item the amount of each individual asset or liability that falls to be taken into account shall be determined separately.

Departure from the accounting principlesN.I.

22.  If it appears to the directors of a company that there are special reasons for departing from any of the principles stated above in preparing the company's accounts in respect of any financial year they may do so, but particulars of the departure, the reasons for it and its effect shall be given in a note to the accounts.

SECTION BN.I.VALUATION RULES

HISTORICAL COST ACCOUNTING RULESN.I.

PreliminaryN.I.

23.  Subject to[F3 paragraphs 39 to 44F], the amounts to be included in respect of all items shown in a company's accounts shall be determined in accordance with the rules set out in paragraphs 24 to 38.

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F3SR 2004/496

Fixed assetsN.I.

General rulesN.I.

24.  Subject to any provision for depreciation or diminution in value made in accordance with paragraph 25 or 26 the amount to be included in respect of any fixed asset shall be its cost.

25.  In the case of any fixed asset which has a limited useful economic life, the amount of:

(a)its cost; or

(b)where it is estimated that any such asset will have a residual value at the end of the period of its useful economic life, its cost less that estimated residual value;

shall be reduced by provisions for depreciation calculated to write off that amount systematically over the period of the asset's useful economic life.

26.  (1)  Where a fixed asset investment of a description falling to be included under Assets items 7 (Participating interests) or 8 (Shares in group undertakings) in the balance sheet format, or any other holding of securities held as a financial fixed asset, has diminished in value, provisions for diminution in value may be made in respect of it and the amount to be included in respect of it may be reduced accordingly; and any such provisions which are not shown in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.

(2) Provisions for diminution in value shall be made in respect of any fixed asset which has diminished in value if the reduction in its value is expected to be permanent (whether its useful economic life is limited or not), and the amount to be included in respect of it shall be reduced accordingly; and any such provisions which are not shown in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.

(3) Where the reasons for which any provision was made in accordance with sub-paragraph (1) or (2) have ceased to apply to any extent, that provision shall be written back to the extent that it is no longer necessary; and any amounts written back in accordance with this sub-paragraph which are not shown in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.

Development costsN.I.

27.  (1)  Notwithstanding that amounts representing “development costs” may be included under Assets item 9 in the balance sheet format, an amount may only be included in a company's balance sheet in respect of development costs in special circumstances.

(2) If any amount is included in a company's balance sheet in respect of development costs the following information shall be given in a note to the accounts:

(a)the period over which the amount of those costs originally capitalised is being or is to be written off; and

(b)the reasons for capitalising the development costs in question.

GoodwillN.I.

28.  (1)  The application of paragraphs 24 to 26 in relation to goodwill (in any case where goodwill is treated as an asset) is subject to the following provisions of this paragraph.

(2) Subject to sub-paragraph (3) the amount of the consideration for any goodwill acquired by a company shall be reduced by provisions for depreciation calculated to write off that amount systematically over a period chosen by the directors of the company.

(3) The period chosen shall not exceed the useful economic life of the goodwill in question.

(4) In any case where any goodwill acquired by a company is included as an asset in the company's balance sheet the period chosen for writing off the consideration for that goodwill and the reasons for choosing that period shall be disclosed in a note to the accounts.

Intangible and tangible fixed assetsN.I.

29.  Assets included in Assets items 9 (Intangible fixed assets) and 10 (Tangible fixed assets) in the balance sheet format shall be valued as fixed assets.

Other fixed assetsN.I.

30.  Other assets falling to be included in the balance sheet shall be valued as fixed assets where they are intended for use on a continuing basis in the company's activities.

Financial fixed assetsN.I.

31.  (1)  Debt securities, including fixed income securities, held as financial fixed assets shall be included in the balance sheet at an amount equal to their maturity value plus any premium, or less any discount, on their purchase, subject to the following provisions of this paragraph.

(2) The amount included in the balance sheet with respect to such securities purchased at a premium shall be reduced each financial year on a systematic basis so as to write the premium off over the period to the maturity date of the security and the amounts so written off shall be charged to the profit and loss account for the relevant financial years.

(3) The amount included in the balance sheet with respect to such securities purchased at a discount shall be increased each financial year on a systematic basis so as to extinguish the discount over the period to the maturity date of the security and the amounts by which the amount is increased shall be credited to the profit and loss account for the relevant years.

(4) The notes to the accounts shall disclose the amount of any unamortised premium or discount not extinguished which is included in the balance sheet by virtue of sub-paragraph (1).

(5) For the purposes of this paragraph “premium” means any excess of the amount paid for a security over its maturity value and “discount” means any deficit of the amount paid for a security over its maturity value.

Current AssetsN.I.

32.  The amount to be included in respect of loans and advances, debt or other fixed income securities and equity shares or other variable yield securities not held as financial fixed assets shall be their cost, subject to paragraphs 33 and 34.

33.  (1)  If the net realisable value of any asset referred to in paragraph 32 is lower than its cost the amount to be included in respect of that asset shall be the net realisable value.

(2) Where the reasons for which any provision for diminution in value was made in accordance with sub-paragraph (1) have ceased to apply to any extent, that provision shall be written back to the extent that it is no longer necessary.

34.  (1)  Subject to paragraph 33, the amount to be included in the balance sheet in respect of transferable securities not held as financial fixed assets may be the higher of their cost or their market value at the balance sheet date.

(2) The difference between the cost of any securities included in the balance sheet at a valuation under sub-paragraph (1) and their market value shall be shown (in aggregate) in the notes to the accounts.

Miscellaneous and supplementary provisionsN.I.

Excess of money owed over value received as an asset itemN.I.

35.  (1)  Where the amount repayable on any debt owed by a company is greater than the value of the consideration received in the transaction giving rise to the debt, the amount of the difference may be treated as an asset.

(2) Where any such amount is so treated:

(a)it shall be written off by reasonable amounts each year and must be completely written off before repayment of the debt; and

(b)if the current amount is not shown as a separate item in the company's balance sheet it must be disclosed in a note to the accounts.

Determination of costN.I.

36.  (1)  The cost of an asset that has been acquired by the company shall be determined by adding to the actual price paid any expenses incidental to its acquisition.

(2) The cost of an asset constructed by the company shall be determined by adding to the purchase price of the raw materials and consumables used the amount of the costs incurred by the company which are directly attributable to the construction of that asset.

(3) In addition, there may be included in the cost of an asset constructed by the company:

(a)a reasonable proportion of the costs incurred by the company which are only indirectly attributable to the construction of that asset, but only to the extent that they relate to the period of construction; and

(b)interest on capital borrowed to finance the construction of that asset, to the extent that it accrues in respect of the period of construction;

provided, however, in a case within head (b), that the inclusion of the interest in determining the cost of that asset and the amount of the interest so included is disclosed in a note to the accounts.

37.  (1)  Subject to the qualification mentioned below, the cost of any assets which are fungible assets (including investments) may be determined by the application of any of the methods mentioned in sub-paragraph (2) in relation to any such assets of the same class.

The method chosen must be one which appears to the directors to be appropriate in the circumstances of the company.

(2) Those methods are:

(a)the method known as “first in, first out” (FIFO);

(b)the method known as “last in, first out” (LIFO);

(c)a weighted average price; and

(d)any other method similar to any of the methods mentioned above.

(3) Where in the case of any company:

(a)the cost of assets falling to be included under any item shown in the company's balance sheet has been determined by the application of any method permitted by this paragraph; and

(b)the amount shown in respect of that item differs materially from the relevant alternative amount given below in this paragraph;

the amount of that difference shall be disclosed in a note to the accounts.

(4) Subject to sub-paragraph (5), for the purposes of sub-paragraph (3)(b), the relevant alternative amount, in relation to any item shown in a company's balance sheet, is the amount which would have been shown in respect of that item if assets of any class included under that item at an amount determined by any method permitted by this paragraph had instead been included at their replacement cost as at the balance sheet date.

(5) The relevant alternative amount may be determined by reference to the most recent actual purchase price before the balance sheet date of assets of any class included under the item in question instead of by reference to their replacement cost as at that date, but only if the former appears to the directors of the company to constitute the more appropriate standard of comparison in the case of assets of that class.

Substitution of original amount where price or cost unknownN.I.

38.  Where there is no record of the purchase price of any asset acquired by a company or of any price, expenses or costs relevant for determining its cost in accordance with paragraph 36, or any such record cannot be obtained without unreasonable expense or delay, its cost shall be taken for the purpose of paragraphs 24 to 34 to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the company.

ALTERNATIVE ACCOUNTING RULESN.I.

PreliminaryN.I.

39.  (1)  The rules set out in paragraphs 24 to 38 are referred to below in this Schedule as the historical cost accounting rules.

(2) Paragraphs 24 to 27 and 31 to 35 are referred to below in this section of this Part as the depreciation rules; and references below in this Schedule to the historical cost accounting rules do not include the depreciation rules as they apply by virtue of paragraph 42.

40.  Subject to paragraphs 42 to 44, the amounts to be included in respect of assets of any description mentioned in paragraph 41 may be determined on any basis so mentioned.

Alternative accounting rulesN.I.

41.  (1)  Intangible fixed assets, other than goodwill, may be included at their current cost.

(2) Tangible fixed assets may be included at a market value determined as at the date of their last valuation or at their current cost.

(3) Investments of any description falling to be included under Assets items 7 (Participating interests) or 8 (Shares in group undertakings) of the balance sheet format and any other securities held as financial fixed assets may be included either:

(a)at a market value determined as at the date of their last valuation; or

(b)at a value determined on any basis which appears to the directors to be appropriate in the circumstances of the company;

but in the latter case particulars of the method of valuation adopted and of the reasons for adopting it shall be disclosed in a note to the accounts.

(4) Securities of any description not held as financial fixed assets (if not valued in accordance with paragraph 34) may be included at their current cost.

Application of the depreciation rulesN.I.

42.  (1)  Where the value of any asset of a company is determined in accordance with paragraph 41, that value shall be, or (as the case may require) be the starting point for determining, the amount to be included in respect of that asset in the company's accounts, instead of its cost or any value previously so determined for that asset; and the depreciation rules shall apply accordingly in relation to any such asset with the substitution for any reference to its cost of a reference to the value most recently determined for that asset in accordance with paragraph 41.

(2) The amount of any provision for depreciation required in the case of any fixed asset by paragraph 25 or 26 as it applies by virtue of sub-paragraph (1) is referred to in this paragraph as the “adjusted amount”, and the amount of any provision which would be required by that paragraph in the case of that asset according to the historical cost accounting rules is referred to as the “historical cost amount”.

(3) Where sub-paragraph (1) applies in the case of any fixed asset the amount of any provision for depreciation in respect of that asset included in any item shown in the profit and loss account in respect of amounts written off assets of the description in question may be the historical cost amount instead of the adjusted amount, provided that the amount of any difference between the two is shown separately in the profit and loss account or in a note to the accounts.

Additional information to be provided in case of departure from historical cost accounting rulesN.I.

43.  (1)  This paragraph applies where the amounts to be included in respect of assets covered by any items shown in a company's accounts have been determined in accordance with paragraph 41.

(2) The items affected and the basis of valuation adopted in determining the amounts of the assets in question in the case of each such item shall be disclosed in a note to the accounts.

(3) In the case of each balance sheet item affected either:

(a)the comparable amounts determined according to the historical cost accounting rules; or

(b)the differences between those amounts and the corresponding amounts actually shown in the balance sheet in respect of that item;

shall be shown separately in the balance sheet or in a note to the accounts.

(4) In sub-paragraph (3), references in relation to any item to the comparable amounts determined as there mentioned are references to:

(a)the aggregate amount which would be required to be shown in respect of that item if the amounts to be included in respect of all the assets covered by that item were determined according to the historical cost accounting rules; and

(b)the aggregate amount of the cumulative provisions for depreciation or diminution in value which would be permitted or required in determining those amounts according to those rules.

Revaluation reserveN.I.

44.  (1)  With respect to any determination of the value of an asset of a company in accordance with paragraph 41, the amount of any profit or loss arising from that determination (after allowing, where appropriate, for any provisions for depreciation or diminution in value made otherwise than by reference to the value so determined and any adjustments of any such provisions made in the light of that determination) shall be credited or (as the case may be) debited to a separate reserve ( “the revaluation reserve”).

(2) The amount of the revaluation reserve shall be shown in the company's balance sheet under Liabilities item 11 in the balance sheet format, but need not be shown under that name.

(3) An amount may be transferred

[F4(a)from the revaluation reserve—

(i)to the profit and loss account, if the amount was previously charged to that account or represents realised profit, or

(ii)on capitalisation,

(b)to or from the revaluation reserve in respect of the taxation relating to any profit or loss credited or debited to the reserve;]

and the revaluation reserve shall be reduced to the extent that the amounts transferred to it are no longer necessary for the purposes of the valuation method used.

(4) In[F4 sub-paragraph (3)(a)(ii)] “capitalisation”, in relation to an amount standing to the credit of the revaluation reserve, means applying it in wholly or partly paying up unissued shares in the company to be allotted to members of the company as fully or partly paid shares.

(5) The revaluation reserve shall not be reduced except as mentioned in this paragraph.

(6) The treatment for taxation purposes of amounts credited or debited to the revaluation reserve shall be disclosed in a note to the accounts.

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F4SR 1997/314

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