The Friendly Societies (Accounts and Related Provisions) Regulations 1994

Statutory Instruments

1994 No. 1983

FRIENDLY SOCIETIES

The Friendly Societies (Accounts and Related Provisions) Regulations 1994

Made

20th July 1994

Laid before Parliament

1st August 1994

Coming into force

1st September 1994

The Friendly Societies Commission, with the consent of the Treasury, in exercise of the powers conferred on it by sections 70 and 71 of, and paragraph 17 of Schedule 14 to, the Friendly Societies Act 1992(1), and of all other powers enabling it in that behalf, hereby makes the following Regulations:

PART I U.K. PRELIMINARY

Citation and commencement U.K.

1.  These Regulations may be cited as the Friendly Societies (Accounts and Related Provisions) Regulations 1994, and shall come into force on 1st September 1994.

Commencement Information

I1 Reg. 1 in force at 1.9.1994, see reg. 1

Interpretation U.K.

2.—(1) In these Regulations:

“the Act” means the Friendly Societies Act 1992;

“associated body”, in relation to a society, means a body in which the society holds shares or corresponding membership rights;

“general business” has the same meaning as in the Act;

“group accounts society” means a society the committee of management of which is obliged by [F1 section 69E] of the Act (duty to prepare accounts) to prepare group accounts;

“long term business” has the same meaning as in the Act;

“long term fund” means the fund or funds maintained by a society in respect of its long term business in accordance with the provisions of the Act;

“member” has the same meaning as in the Act;

“non-directive society” means a friendly society to which section 37(2) or (3) of the Act does not apply, which is a registered society and which does not carry on reinsurance business;

“particular account” means an income and expenditure account or a balance sheet;

“policy holder”, in relation to a subsidiary or a jointly controlled body of a friendly society, has the same meaning as in [F2 any order made under section 424(2) of the Financial Services and Markets Act 2000 and for the time being in force];

“single accounts society” means a society which is not a group accounts society;

“society” means a friendly society—

(a)

to which section 37(2) or (3) of the Act applies,

(b)

which is an incorporated friendly society, or

(c)

which carries on reinsurance business; and

“subsidiary” means a subsidiary of a group accounts society with which the group accounts of the society are required by [F1 section 69E] of the Act to deal;

(2) Where a society or a non-directive society (in this paragraph referred to as a central office) has registered branches, a requirement in these Regulations in respect of a society or a non-directive society is, except where it is expressly otherwise provided, a requirement which the central office and the registered branch must each comply with as if each of them is a society or a non-directive society.

(3) Nothing in these Regulations is to be taken to imply that the carrying on by a society of any activity provision for the recording of which is contained in these Regulations is, by virtue of that provision, within the powers of that society.

Textual Amendments

F1 Words in reg. 2(1) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(2)

F2 Words in art. 2(1) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649), arts. 1, 465

Commencement Information

I2 Reg. 2 in force at 1.9.1994, see reg. 1

Application U.K.

3.  The Regulations apply to the accounts and reports (as specified in regulations 4, 5, 11 and 12) of every society to which Part VI of the Act applies in respect of any financial year of the society ending on or after 31st December 1995.

Commencement Information

I3 Reg. 3 in force at 1.9.1994, see reg. 1

PART II— U.K. ACCOUNTS

Annual accounts—single accounts society U.K.

4.  In respect of the annual accounts of a single accounts society:

(a) every income and expenditure account must be prepared in the format set out in Part I of Schedule 1; and

(b) every balance sheet must be prepared in the format set out in Part I of Schedule 2.

Commencement Information

I4 Reg. 4 in force at 1.9.1994, see reg. 1

Annual accounts—group accounts society U.K.

5.  In respect of the annual accounts of a group accounts society:

(a) the provisions of this regulation apply subject to the provisions of regulation 7 below, the supplementary provisions of which also have effect in relation to those accounts; and

(b) within those accounts:

(i) every income and expenditure account relating to the society must be prepared in the format set out in Part I of Schedule 1;

(ii) every income and expenditure account relating to the society and its subsidiaries must be prepared on a consolidated basis in the format set out in Part I of Schedule 1 with the modifications specified in Part II of that Schedule;

(iii) every balance sheet relating to the society must be prepared in the format set out in Part I of Schedule 2; and

(iv) every balance sheet relating to the society and its subsidiaries must be prepared on a consolidated basis in the format set out in Part I of Schedule 2 with the modifications specified in Part II of that Schedule.

Commencement Information

I5 Reg. 5 in force at 1.9.1994, see reg. 1

Content and form of accounts U.K.

6.—(1) An income and expenditure account and balance sheet referred to in regulations 4, 5 and 11 must be prepared in accordance with the relevant notes and every such document must, subject to the following paragraphs of this regulation, be prepared in the order and under the headings and subheadings in the format applicable to it.

(2) Regulations 4, 5 and 11 are not to be read as:

(a) requiring the heading or sub-heading for any item to be distinguished by any letter or number assigned to that item in the format in which it appears;

(b) prohibiting the showing of any item in a particular account in greater detail than is required by the format for that particular account; or

(c) prohibiting the insertion of additional items, providing that their contents are not specifically covered by any of the items prescribed in the formats.

(3) Items preceded by lower case letter in any format set out in Schedule 1, 2 or 7 may be combined in a society’s annual accounts for any financial year if either:

(a) their individual amounts are not material to assessing:

(i) in respect of any income and expenditure account, the income and expenditure of the society (or, as the case may be, the society and its subsidiaries) for that year; and

(ii) in respect of a balance sheet, the state of affairs of the society (or, as the case may be, the society and its subsidiaries) as at the end of that year; or

(b) their combination facilitates that assessment,

provided that where subparagraph (b) above applies, the individual amounts of any items so combined must be disclosed in a note to the annual accounts.

(4) Subject to paragraph (5) below, a heading or sub-heading for an item contained in any format set out in Schedule 1, 2 or 7 must not be included if there is no amount to be shown for that item in respect of the financial year to which the annual accounts relate (and a total need not be included if, as a result of this paragraph, it would be composed of a single item).

(5) For the purpose of comparing particular accounts with those for the preceding financial year:

(a) in respect of every item shown in a balance sheet and income and expenditure account, the corresponding amount for the preceding financial year must be shown;

(b) where that 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 annual accounts relate, the former amount must be adjusted and particulars of the adjustment and the reasons for it must be disclosed in a note to the annual accounts; and

(c) paragraph (4) above does not apply in any case where an amount can be shown for the item to which the heading or sub-heading relates in respect of the preceding financial year, and in such a case that amount must be shown under the heading or sub-heading required for that item.

(6) Subject to the provisions of Schedules 1, 2 and 7, 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.

(7) In this regulation, “the relevant notes” means, in relation to any particular account, Part III of Schedule 1, Part III and Part IV of Schedule 2 or Part III of Schedule 7, whichever is applicable.

Commencement Information

I6 Reg. 6 in force at 1.9.1994, see reg. 1

Group accounts—supplementary provisions U.K.

7.—(1) The annual accounts of a group accounts society must comply with the further provisions of Schedule 3 as to the form and content of the consolidated income and expenditure account and the balance sheet, and the additional information to be provided by way of notes to the accounts.

(2) Subject to the exceptions authorised or required by this regulation, all the subsidiaries of the society must be included in the consolidated income and expenditure account and the balance sheet as required by Regulation 5, and in the notes to the accounts in respect of the society and its subsidiaries in combination, as required by regulation 8(2)(b).

(3) A subsidiary may be excluded from the requirements of paragraph (2) if compliance with those requirements is not material for the purpose of giving a true and fair view for the society and its subsidiaries as a whole, of the matters set out in [F3 subsection (2) of section 69F] of the Act.

(4) If a society has two or more subsidiaries, they do not qualify under paragraph (3) for exclusion from the requirements of paragraph (2) if taken as a whole they are material for the purpose enumerated in paragraph (3).

(5) Each particular account which is a group account must combine the information contained in the particular account of the society and the accounts of its subsidiaries from which it is derived, adjusted so far as is necessary to consolidate those accounts.

(6) In the group accounts, the interest of the society in a jointly controlled body and the amount of profit or loss attributable to such an interest, must be shown by the equity method of accounting (which must include dealing with any goodwill arising in accordance with paragraphs 19 to 22 and 24 of Schedule 6).

(7) The equity method of accounting referred to in paragraph (6) need not be applied if the amounts in question are not material for the purpose of giving a true and fair view, for the society and its subsidiaries as a whole, of the matters set out in [F4 subsection (2) of section 69F] of the Act.

Textual Amendments

F3 Words in reg. 7(3) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(3)(a)

F4 Words in reg. 7(7) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(3)(b)

Commencement Information

I7 Reg. 7 in force at 1.9.1994, see reg. 1

Notes to annual accounts U.K.

8.—(1) The annual accounts of a single accounts society must, subject to paragraph (6) below, include notes to them containing the material specified, and set out in the manner specified, in Schedule 4 below, as well as the notes required to be included by other provisions of these Regulations.

(2) The annual accounts of a group accounts society must, subject to paragraph (6) below and any provision in Schedule 4 below which indicates otherwise, include notes to them containing:

(a) in respect of the society; and

(b) in respect of the society and its subsidiaries in combination,

the material specified, and set out in the manner specified, in Schedule 4 below, as well as the notes required to be included by other provisions of these Regulations.

(3) For the purposes of paragraph (2)(b) above:

(a) any reference in F5 ... Schedule 4 below to a society must be taken as a reference to the society and its subsidiaries in combination; and

(b) each associated body of the society which is not a subsidiary must be treated as an associated body of the group.

F6 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The annual accounts of a non-directive society must include notes to them containing the material from Schedule 4 below as is specified in Part II of Schedule 7 below, (and such material must be, as far as is possible, set out in the manner specified in Schedule 4 below), as well as the notes required to be included by other provisions of these Regulations and in the application of the Schedule to a non-directive society, references in the Schedule to a society are, where appropriate, to be construed as references to a non-directive society.

(6) Paragraphs (1), (2) and (5) above are not to be read as prohibiting the disclosing of any material in the notes to the annual accounts in greater detail than is required by these Regulations.

Textual Amendments

F5 Words in reg. 8(3)(a) omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), reg. 1(2), Sch. para. 1(a)

F6 Reg. 8(4) omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), reg. 1(2), Sch. para. 1(b)

Commencement Information

I8 Reg. 8 in force at 1.9.1994, see reg. 1

Associated bodies U.K.

F7 9.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F7 Reg. 9 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 3

Accounting principles and rules U.K.

10.—(1) A society must prepare its annual accounts in accordance with the accounting principles and rules set out in Schedule 6.

(2) A non-directive society must prepare its annual accounts in accordance with the accounting principles and rules set out in Parts I and II of Schedule 6 and in the application of those Parts of the Schedule to a non-directive society, references in those Parts to a society are, where appropriate, to be construed as references to a non-directive society.

Commencement Information

I9 Reg. 10 in force at 1.9.1994, see reg. 1

[F8 Accounts to have regard to substance of a transaction U.K.

10A.   The management committee of a society shall, in determining how amounts are presented within items in the income and expenditure account and balance sheet, have regard to the substance of the reported transaction or arrangement, in accordance with generally accepted accounting principles or practice.]

Textual Amendments

F8 Reg. 10A inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(4)

Annual accounts—non-directive society U.K.

11.  In respect of the annual accounts of a non-directive society:

(a) every income and expenditure account must be prepared in the format set out in Part I of Schedule 7;

(b) every balance sheet must be prepared in the format set out in Part II of Schedule 7; and

(c) such accounts must be prepared in accordance with the requirements set out in regulation 8 above as modified in Part III of Schedule 7.

Commencement Information

I10 Reg. 11 in force at 1.9.1994, see reg. 1

PART III— U.K. COMMITTEE OF MANAGEMENT'S ANNUAL REPORT

Committee of management’s annual report U.K.

12.—(1) Each committee of management’s annual report of a society prepared under section 71 of the Act (Report of the committee of management of a friendly society on the society’s affairs) must contain, in addition to the other matters required to be contained in it by the Act, the material specified in Part I of Schedule 8.

(2) Each committee of management’s annual report of a non-directive society prepared under section 71 of the Act (Report of the committee of management of a friendly society on the society’s affairs) must contain the material specified in Part I of Schedule 8 as modified by Part II of the Schedule 8.

Commencement Information

I11 Reg. 12 in force at 1.9.1994, see reg. 1

PART IV— U.K. MISCELLANEOUS AND GENERAL

Transitional provisions U.K.

13.—(1) A society may, with respect to a financial year preceding the financial year of the society to which these Regulations first apply, prepare such annual accounts as it would have been required to prepare had these Regulations not been made.

(2) Where any provision of these Regulations requires the recording of a particular item during or as at the end of a previous financial year, and where:

(a) that previous financial year ended before the coming into force of these Regulations; and

(b) the legislation in force as at the end of that previous financial year did not require the recording of that particular item,

then, if the records of the society are so kept as to enable that particular item to be identified, it must be identified and so recorded, but if the records of the society are not so kept, it must be included on the basis of an estimate.

(3) Where under paragraph (2) an estimate is used in respect of any item, that fact must be disclosed in a note to the accounts.

Commencement Information

I12 Reg. 13 in force at 1.9.1994, see reg. 1

Interpretation of Schedules U.K.

14.  Schedule 9 has effect for the interpretation of the Schedules to these Regulations.

Commencement Information

I13 Reg. 14 in force at 1.9.1994, see reg. 1

In witness whereof the common seal of the Friendly Societies Commission is hereto fixed, and is authenticated by me, a person authorised under paragraph 13 of Schedule 1 to the Friendly Societies Act 1992 on 18th July 1994.

L.S.

Michael Cook

Secretary to the Commission

We consent to this Order.

Tim Wood

Irvine Patnick

Two of the Lords Commissioners of Her Majesty’s Treasury.

20th July 1994.

Regulations 4 and 5

SCHEDULE 1 U.K.

PART I U.K. INCOME AND EXPENDITURE ACCOUNT FORMAT

Commencement Information

I14 Sch. 1 Pt. I in force at 1.9.1994, see reg. 1

I. U.K. Technical account—General business

1.  Earned premiums, net of reinsurance U.K.

(a) gross premiums written (1)

(b) outward reinsurance premiums (2)

(c) change in the gross provision for unearned premiums

(d) change in the provision for unearned premiums, reinsurers' share

2.  Allocated investment return transferred from the non-technical account (item III.6) (10) U.K.

2a.  Investment income (8)(10) U.K.

(a) income from shares in subsidiaries

(b) income from other investments with a separate indication of that derived from jointly controlled bodies

(aa) income from land and buildings

(bb) income from other investments

(c) value re-adjustments on investments

(d) gains on the realisation of investments

3.  Other technical income, net of reinsurance U.K.

4.  Claims incurred, net of reinsurance (4) U.K.

(a) claims paid

(aa) gross amount

(bb) reinsurers' share

(b) change in the provision for claims

(aa) gross amount

(bb) reinsurers' share

5.  Change in other technical provisions, net of reinsurance, not shown under other headings U.K.

6.  Bonuses and rebates, net of reinsurance (5) U.K.

7.  Net operating expenses U.K.

(a) acquisition costs (6)

(b) change in deferred acquisition costs

(c) administrative expenses (7)

(d) reinsurance commissions and profit participation

8.  Other technical charges, net of reinsurance U.K.

9.  Investment expenses and charges (8) U.K.

(a) investment management expenses, including interest

(b) value adjustments on investments

(c) losses on the realisation of investments

10.  Sub-total (balance on the technical account for general business) (item III.1) U.K.

II. U.K. Technical account—Long term business

1.  Earned premiums, net of reinsurance U.K.

(a) gross premiums written (1)

(b) outward reinsurance premiums (2)

(c) change in the provision for unearned premiums, net of reinsurance (3)

2.  Investment income (8)(10) U.K.

(a) income from shares in subsidiaries

(b) income from other investments with a separate indication of that derived from jointly controlled bodies

(aa) income from land and buildings

(bb) income from other investments

(c) value re-adjustments on investments

(d) gains on the realisation of investments

3.  Unrealised gains on investments (9) U.K.

4.  Other technical income, net of reinsurance U.K.

5.  Claims incurred, net of reinsurance (4) U.K.

(a) claims paid

(aa) gross amount

(bb) reinsurers' share

(b) change in the provision for claims

(aa) gross amount

(bb) reinsurers' share

6.  Change in other technical provisions, net of reinsurance, not shown under other headings U.K.

(a) long term business provision, net of reinsurance (3)

(aa) gross amount

(bb) reinsurers' share

(b) other technical provisions, net of reinsurance

7.  Bonuses and rebates, net of reinsurance (5) U.K.

8.  Net operating expenses U.K.

(a) acquisition costs (6)

(b) change in deferred acquisition costs

(c) administrative expenses (7)

(d) reinsurance commissions and profit participation

9.  Investment expenses and charges (8) U.K.

(a) investment management expenses, including interest

(b) value adjustments on investments

(c) losses on the realisation of investments

10.  Unrealised losses on investments (9) U.K.

11.  Other technical charges, net of reinsurance U.K.

11a.  Tax attributable to the long term business U.K.

12.  Allocated investment return transferred to the non-technical account (item III.4) U.K.

12a.  Transfers to or from the fund for future appropriations U.K.

13.  Sub-total (balance on the technical account—long term business) (item III.2) U.K.

III. U.K. Non-technical account

1.  Balance on the general business technical account—(item I.10) U.K.

2.  Balance on the long term business technical account—(item II.13) U.K.

3.  Investment income (8) U.K.

(a) income from shares in subsidiaries

(b) income from other investments with a separate indication of that derived from jointly controlled bodies

(aa) income from land and buildings

(bb) income from other investments

(c) value re-adjustments on investments

(d) gains on the realisation of investments

3a.  Unrealised gains on investments (9) U.K.

4.  Allocated investment return transferred from the long term business technical account (item II.12) (10) U.K.

5.  Investment expenses and charges (8) U.K.

(a) investment management expenses, including interest

(b) value adjustments on investments

(c) losses on the realisation of investments

5a.  Unrealised losses on investments (9) U.K.

6.  Allocated investment return transferred to the general business technical account (item I.2)(10) U.K.

7.  Other income U.K.

8.  Other charges, including value adjustments U.K.

8a.  Excess of income over expenditure on ordinary activities before tax U.K.

9.  Tax on excess of income over expenditure on ordinary activities U.K.

10.  Excess of income over expenditure on ordinary activities after tax U.K.

11.  Extraordinary income U.K.

12.  Extraordinary charges U.K.

13.  Extraordinary gain or loss U.K.

14.  Tax on extraordinary gain or loss U.K.

15.  Other taxes not shown under the preceding items U.K.

16.  Excess of income over expenditure for the financial year U.K.

PART II U.K. FORMAT OF CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT

Commencement Information

I15 Sch. 1 Pt. II in force at 1.9.1994, see reg. 1

The modifications to Part I of this Schedule for the format of a consolidated income and expenditure account are as follows:

(1) Items I.2a(a), II.2(a) and III.3(a) (income from shares in subsidiaries) must be omitted.

(2) Items III.10 (Excess of income over expenditure on ordinary activities after tax) must be replaced by the following items:

III.10a. Excess of income over expenditure on ordinary activities after tax

III.10b. Minority Interests.

(3) Items III.14 (Tax on extraordinary gain or loss) must be replaced by the following items:

III.14a. Tax on extraordinary gain or loss

III.14b. Extraordinary gain or loss after tax

III.14c. Minority interests in extraordinary gain or loss after tax.

(4) In the case of general business, investment income expenses and charges may be disclosed in the non-technical account rather than in the technical account.

(5) In the case of subsidiaries which are not authorised to carry on long term business in United Kingdom, notes (8) and (9) to the income and expenditure account format have effect as if references to investment income, expenses and charges arising in the long term fund or to investments attributed to the long term fund were references to investment income, expenses and charges or (as the case may be) investments relating to long term business.

(6) In the case of subsidiaries which do not have a head office in United Kingdom, the computation required by paragraph 37 of Schedule 6 must be made annually by an actuary or other specialist in the field on the basis of recognised actuarial methods.

(7) The information required by paragraphs 26 to 29 of Schedule 4 need not be shown.

PART III U.K. NOTES ON THE INCOME AND EXPENDITURE FORMAT

Commencement Information

I16 Sch. 1 Pt. III in force at 1.9.1994, see reg. 1

(1) Gross premiums written

• (General business technical account: item I.1.(a)

• Long term business technical account: item II.1.(a))

• This item must comprise all amounts due during the financial year in respect of insurance contracts entered into regardless of the fact that such amounts may relate in whole or in part to a later financial year, and must include inter alia:

  (i)

  premiums yet to be determined, where the premium calculation can be done only at the end of the year;

  (ii)

  single premiums, including annuity premiums, and, in long term business, single premiums resulting from bonus and rebate provisions in so far as they must be considered as premiums under the terms of the contract;

  (iii)

  additional premiums in the case of half-yearly, quarterly or monthly payments and additional payments from members or policy holders for expenses borne by the society;

  (iv)

  in the case of co-insurance, the society’s portion of total premiums;

  (v)

  reinsurance premiums due from ceding and retroceding insurance undertakings, including portfolio entries, after deduction of cancellations and portfolio withdrawals credited to ceding and retroceding insurance undertakings.

  • The above amounts must not include the amounts of taxes or duties levied with premiums.

(2) Outward reinsurance premiums

• (General business technical account; item I.1.(b)

• Long term business technical account: item II.1(b))

• This item must comprise all premiums paid or payable in respect of outward reinsurance contracts entered into by the society. Portfolio entries payable on the conclusion or amendment of outward reinsurance contracts must be added; portfolio withdrawals receivable must be deducted.

(3) Change in the provision for unearned premiums, net of reinsurance

• (Long term business technical account: items II.1.(c) and II.6.(a))

• In the case of long term business, the change in unearned premiums may be included either in item II.1.(c) or in item II.6.(a) of the long term business technical account.

(4) Claims incurred, net of reinsurance

• (General business technical account: item I.4

• Long term business technical account: item II.5)

• This item must comprise all payments made in respect of the financial year with the addition of the provision for claims (but after deducting the provision for claims for the preceding financial year).

• These amounts must include annuities, surrenders, entries and withdrawals of loss provisions to and from ceding insurance undertakings and reinsurers and external and internal claims management costs and charges for claims incurred but not reported such as are referred to in paragraphs 38(2) and 40 of Schedule 6 below.

• Sums recoverable on the basis of subrogation and salvage (within the meaning of paragraph 38 of Schedule 6 (below) must be deducted.

• Where the difference between:

  (a)

  the loss provision made at the beginning of the year for outstanding claims incurred in previous years; and

  (b)

  the payments made during the year on account of claims incurred in previous years and the loss provision shown at the end of the year for such outstanding claims,

  is material, it must be shown in the notes to the accounts, broken down by category and amount.

(5) Bonuses and rebates, net of reinsurance

• (General business technical account: item I.6

• Long term business technical: item II.7)

• Bonuses must comprise all amounts chargeable for the financial year which are paid or payable to members and, policy holders, other insured parties or provided for their benefit, including amounts used to increase technical provisions or applied to the reduction of future premiums, to the extent that such amounts represent an allocation of surplus or income arising on business as a whole or a section of business, after deduction of amounts provided in previous years which are no longer required.

• Rebates must comprise such amounts to the extent that they represent a partial refund of premiums resulting from the experience of individual contracts.

• Where material, the amount charged for bonuses and that charged for rebates must be disclosed separately in the notes to the accounts.

Acquisition costs

(6) (General business technical account: item I.7.(a)

• Long term business technical account: item II.8.(a))

• This item must comprise the costs arising from the conclusion of insurance contracts. They must cover both direct costs, such as acquisition commissions or the cost of drawing up the insurance document or including the insurance contract in the portfolio, and indirect costs, such as advertising costs or the administrative expenses connected with the processing of proposals and the issuing of policies.

• In the case of long term business, policy renewal commissions must be included under item II.8.(c) in the long term business technical account.

(7) Administrative expenses

• (General business technical account: item I.7.(c)

• Long term business technical account: item II.8.(c))

• This item must include the costs arising from premium collection, portfolio administration, handling of bonuses and rebates, and inward and outward reinsurance. They must in particular include staff costs and depreciation provisions in respect of office furniture and equipment in so far as these need not be shown under acquisition costs, claims incurred or investment charges. Item II.8.(c) must also include policy renewal commissions.

(8) Investment income, expenses and charges

• (General business technical account: items I.2a and 9

• Long term business technical account: items II.2 and 9

• Non-technical account: items III.3 and 5)

• Investment income, expenses and charges must, to the extent that they arise in the long term fund, be disclosed in the long term business technical account. Other investment income, expenses and charges must either be disclosed in the non-technical account or attributed between the appropriate technical and non-technical accounts. Where the society makes such an attribution it must disclose the basis for it in the notes to the accounts.

(9) Unrealised gains and losses on investments

• (Long term business technical account: items II.3 and 10

• Non-technical account: items III.3a and 5a)

• In the case of investments attributed to the long term fund, the difference between the valuation of the investments and their purchase price or, if they have previously been valued, their valuation as at the last balance sheet date, may be disclosed (in whole or in part) in item II.3 or II.10 (as the case may be) of the long term business technical account, and in the case of investments shown as assets under Assets item D (assets held to cover linked liabilities) must be so disclosed.

• In the case of other investments, the difference between the valuation of the investments and their purchase price or, if they have previously been valued, their valuation as at the last balance sheet date, may be disclosed (in whole or in part) in item III.3a or III.5a (as the case may require) of the non-technical account.

(10) Allocated investment return

• (General business technical account: items I.2 and 2a

• Long term business technical account: item II.2

• Non-technical account: items III.4 and 6)

• The allocated return may be transferred from one part of the income and expenditure account to another.

• Where part of the investment return is transferred to the general business technical account, the transfer from the non-technical account must be deducted from item III.6 and added to item I.2. Where part of the investment return disclosed in the long term business technical account is transferred to the non-technical account, the transfer to the non-technical account must be deducted from item II.12 and added to item III.4.

• The reasons for such transfers (which may consist of a reference to any relevant statutory requirement) and the bases on which they are made must be disclosed in the notes to the accounts.

Regulations 4 and 5

SCHEDULE 2 U.K.

PART I U.K. BALANCE SHEET FORMAT

Commencement Information

I17 Sch. 2 Pt. I in force at 1.9.1994, see reg. 1

ASSETS U.K.

“A.    Intangible assets U.K.

1. Development costs

2. Concessions, patents, licences, trade marks and similar rights and assets (1)

3. Goodwill (2)

4. Payments on account

“B.    Investments U.K.

I. Land and buildings (3)

II. Investments in associated bodies

1. Investments in subsidiaries

(a) Shares

(b) Loans

2. Investments in jointly controlled bodies

(a) Shares

(b) Loans

3. Significant investments in other associated bodies (4)

(a) Shares

(b) Loans

III. Other financial investments

1. Shares and other variable-yield securities and units in unit trusts

2. Debt securities and other fixed income securities (5)

3. Participation in investment pools (6)

4. Loans secured by mortgages (7)

5. Other loans (7)

6. Deposits with credit institutions (8)

7. Other (9)

IV. Deposits with ceding undertakings (10)

“C.    Assets held to cover linked liabilities (11) U.K.

“D.    Reinsurers' share of technical provisions (12) U.K.

1. Provision for unearned premiums

2. Long term business provision

3. Claims outstanding

4. Provisions for bonuses and rebates

5. Other technical provisions

6. Technical provisions for unit-linked liabilities

“E.    Debtors (13) U.K.

I. Debtors arising out of direct insurance operations

1. Members or policyholders

2. Intermediaries

II. Debtors arising out of reinsurance operations

III. Other debtors

“F.    Other assets U.K.

I. Tangible assets

1. Fixtures, fittings, tools and equipment

2. Payments on account (other than deposits paid on land and buildings) and assets (other than buildings) in course of construction

II. Stocks

1. Raw materials and consumables

2. Work in progress

3. Finished goods and goods for resale

4. Payments on account

III. Cash at bank and in hand

IV. Other (14)

“G.    Prepayments and accrued income U.K.

I. Accrued interest and rent (15)

II. Deferred acquisition costs (16)

III. Other prepayments and accrued income

LIABILITIES U.K.

“A.    Reserves U.K.

I. Revaluation reserve

II. Reserves provided for by the rules and tables

III. Other reserves

“B.    Subordinated liabilities (17) U.K.

“Ba.    Fund for future appropriations (18) U.K.

“C.    Technical provisions U.K.

1. Provision for unearned premiums (19)

(a) gross amount

(b) reinsurance amount (12)

2. Long term business provision (19)(20)(24)

(a) gross amount

(b) reinsurance amount (12)

3. Claims outstanding (21)

(a) gross amount

(b) reinsurance amount (12)

4. Provision for bonuses and rebates (22)

(a) gross amount

(b) reinsurance amount (12)

5. Other technical provisions (23)

(a) gross amount

(b) reinsurance amount (12)

“D.    Technical provisions for linked liabilities (24) U.K.

(a) gross amount

(b) reinsurance amount (12)

“E.     [F9 Provisions for liabilities] U.K.

1. Provisions for pensions and similar obligations

2. Provisions for taxation

3. Other provisions

Textual Amendments

F9 Words in Sch. 2 Pt. 1 substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(5)

“F.    Deposits received from reinsurers (25) U.K.

“G.    Creditors (26) U.K.

I. Creditors arising out of direct insurance operations

II. Creditors arising out of reinsurance operations

III. Debenture loans (27)

IV. Amounts owed to credit institutions

V. Other creditors including taxation and social security

“H.    Accruals and deferred income U.K.

PART II U.K. FORMAT OF CONSOLIDATED BALANCE SHEET

Commencement Information

I18 Sch. 2 Pt. II in force at 1.9.1994, see reg. 1

The modifications to Part I of this Schedule for the format of a consolidated balance sheet are as follows:

(1) Assets items B.II.1.(a) and (b) (Investments in subsidiaries, (a) shares and (b) loans) must be omitted.

(2) After Liabilities item A.III. (Other reserves) there must be inserted the following new item: “IV. Minority interests”.

(3) The information required by paragraph 1 of Part IV of this Schedule need not be given.

PART III U.K. NOTES ON THE BALANCE SHEET FORMAT

Commencement Information

I19 Sch. 2 Pt. III in force at 1.9.1994, see reg. 1

(1) Concessions, patents, licences, trade marks and similar rights and assets

• (Assets item A.2)

• Amounts in respect of assets must only be included in a society’s balance sheet under this item if either:

  (a)

  the assets were acquired for valuable consideration and are not required to be shown under goodwill; or

  (b)

  the assets in question were created by the society itself.

(2) Goodwill

• (Assets item A.3)

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

(3) Land and buildings

• (Assets item B.I)

• The amount of any land and buildings occupied by the society for its own activities must be shown separately in the notes to the accounts.

(4) Significant investments in other associated bodies

• (Asset item B.II.3)

• An investment is significant if it falls within the description in [F10 paragraph 5(2) of Schedule 13E to the Act].

(5) Debt securities and other fixed income securities

• (Assets item B.III.2)

• This item must comprise transferable debt securities and any other transferable fixed income securities issued by credit institutions, other undertakings or public bodies, in so far as they are not covered by Assets item B.II.1.(b), B.II.2.(b) or B.II.3.(b).

• 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, must also be regarded as debt securities and other fixed income securities and so be included under this item.

(6) Participation in investment pools

• (Assets item B.III.3)

• This item must comprise shares held by the society in joint investments constituted by several undertakings or pension funds, the management of which has been entrusted to one of those undertakings or to one of those pension funds.

(7) Loans secured by mortgages and other loans

• (Assets items B.III.4 and B.III.5)

• Loans to members or policy holders for which the policy is the main security must be included under “Other loans” and their amount must be disclosed in the notes to the accounts. Loans secured by mortgage must be shown as such even where they also secured by insurance policies. Where the amount of “Other loans” not secured by policies is material, an appropriate breakdown must be given in the notes to the accounts.

(8) Deposits with credit institutions

• (Assets item B.III.6)

• This item must comprise sums the withdrawal of which is subject to a time restriction. Sums deposited with no such restriction must be shown under Assets item F.III even if they bear interest.

(9) Other

• (Assets item B.III.7)

• This item must comprise those investments which are not covered by Assets items B.III.1 to 6. Where the amount of such investments is significant, they must be disclosed in the notes to the accounts.

(10) Deposits with ceding undertakings

• (Assets item B.IV)

• Where the society accepts reinsurance this item must comprise amounts, owed by the ceding undertakings and corresponding to guarantees, which are deposited with those ceding undertakings or with third parties or which are retained by those undertakings.

• These amounts may not be combined with other amounts owed by the ceding insurer to the reinsurer or set off against amounts owed by the reinsurer to the ceding insurer.

• Securities deposited with ceding undertakings or third parties which remain the property of the society must be entered in the society’s accounts as an investment, under the appropriate item.

(11) Assets held to cover linked liabilities

• (Assets item C)

• In respect of long term business, this item must comprise investments made pursuant to long term policies under which the benefits payable to the member or policy holders are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified).

• This item must also comprise investments which are held on behalf of the members or policy holders of a tontine and are intended for distribution among them.

(12) Reinsurance amounts

• (Assets item D: Liabilities items C.1(b), 2(b), 3(b), 4(b) and 5(b) and D(b))

• The reinsurance amounts may be shown either under Assets item D or under Liabilities items C.1(b), 2(b), 3(b), 4(b) and 5(b) and D(b).

• The reinsurance amounts must comprise the actual or estimated amounts which, under contractual reinsurance arrangements, are deducted from the gross amounts of technical provisions.

• As regards the provision for unearned premiums, the reinsurance amounts must be calculated according to the methods referred to in paragraph 35 of Schedule 6 below or in accordance with the terms of the reinsurance policy.

(13) Debtors

• (Assets item E)

• Amounts owed by jointly controlled bodies and subsidiaries must be shown separately as sub-items of Assets E.I, II and III.

(14) Other

• (Asset item F.IV)

• This item must comprise those assets which are not covered by Assets items F.I to III. Where such assets are material they must be disclosed in the notes to the accounts.

(15) Accrued interest and rent

• (Assets item G.I)

• This item must comprise those items that represent interest and rent that have been earned up to the balance-sheet date but have not yet become receivable.

(16) Deferred acquisition costs

• (Assets item G.II)

• This item must comprise the costs of acquiring insurance policies which are incurred during a financial year but relate to a subsequent financial year (“deferred acquisition costs”), except in so far as:

  (a)

  allowance has been made in the computation of the long term business provision made under paragraph 37 of Schedule 6 below and shown under Liabilities item C2 or D in the balance sheet, for:

  (i)

  the explicit recognition of such costs; or

  (ii)

  the implicit recognition of such costs by virtue of the anticipation of future income from which such costs may prudently be expected to be recovered; or

  (b)

  allowance has been made for such costs in respect of general business policies by a deduction from the provision for unearned premiums made under paragraph 35 of Schedule 6 below and shown under Liabilities item C.1 in the balance sheet.

• Deferred acquisition costs arising in general business must be distinguished from those arising in long term business.

• In the case of general business, the amount of any deferred acquisition costs must be established on a basis compatible with that used for unearned premiums.

• There must be disclosed in the notes to the accounts how the deferral of acquisition costs has been treated (unless otherwise expressly stated in the accounts), and:

  (a)

  where such costs are included as a deduction from the provisions at Liabilities item C.1, the amount of such deduction; or

  (b)

  where the actuarial method used in the calculation of the provisions at Liabilities item C.2 or D has made allowance for the explicit recognition of such costs, the amount of the costs so recognised.

(17) Subordinated liabilities

• (Liabilities item B)

• This item must comprise all liabilities in respect of which there is a contractual obligation that, in the event of winding up or of dissolution, they are to be repaid only after the claims of all other creditors have been met (whether or not they are represented by certificates).

(18) Fund for future appropriations

• (Liabilities item Ba)

• This item must comprise all funds the allocation of which to members or policy holders has not been determined by the end of the financial year.

• Transfers to and from this item must be shown in item II.12a in the income and expenditure account.

(19) Provision for unearned premiums

• (Liabilities item C.1)

• In the case of long term business the provision for unearned premiums may be included in Liabilities item C.2 rather than in this item.

• The provision for unearned premiums must comprise the amount representing that part of gross premiums written which is estimated to be earned in the following financial year or to subsequent financial years.

(20) Long term business provision

• (Liabilities item C.2)

• This item must comprise the actuarially estimated value of the society’s liabilities (excluding technical provisions included in Liabilities item D), including bonuses already declared and after deducting the actuarial value of future premiums.

• This item must also comprise claims incurred but not reported, plus the estimated costs of settling such claims.

(21) Claims outstanding

• (Liabilities item C.3)

• This item must comprise the total estimated ultimate cost to the society of settling all claims arising from events which have occurred up to the end of the financial year (including, in the case of general business, claims incurred but not reported) less amounts already paid in respect of such claims.

(22) Provision for bonuses and rebates

• (Liabilities item C.4)

• This item must comprise amounts intended for members or policy holders by way of bonuses and rebates as defined in Note (5) on the income and expenditure account format to the extent that such amounts have not been credited to members or policy holders, or included in Liabilities item Ba or in Liabilities item C.2.

(23) Other technical provisions

• (Liabilities item C.5)

• This item must comprise, inter alia, the provision for unexpired risks as defined in paragraph 8 of Schedule 9 below. Where the amount of the provision for unexpired risks is significant, it must be disclosed separately either in the balance sheet or in the notes to the accounts.

(24) Technical provisions for linked liabilities

• (Liabilities item D)

• This item must comprise technical provisions constituted to cover liabilities relating to investment in the context of long term policies under which the benefits payable to members or policy holders are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified).

• Any additional technical provisions constituted to cover death risks, operating expenses or other risks (such as benefits payable at the maturity date or guaranteed surrender values) must be included under Liabilities item C.2.

• This item must also comprise technical provisions representing the obligations of a tontine’s organiser in relation to its members or policy holders.

(25) Deposits received from reinsurers

• (Liabilities item F)

• Where the society cedes reinsurance, this item must comprise amounts deposited by or withheld from other insurance undertakings under reinsurance contracts. These amounts may not be merged with other amounts owed to or by those other undertakings.

• Where the society cedes reinsurance and has received as a deposit securities which have been transferred to its ownership, this item must comprise the amount owed by the society by virtue of the deposit.

(26) Creditors

• (Liabilities item G)

• Amounts owed to jointly controlled bodies and subsidiaries must be shown separately as sub-items.

(27) Debenture loans

• (Liabilities item G.III)

• The amount of any convertible loans must be shown separately.

Textual Amendments

F10 Words in Sch. 2 Pt. 3 substituted (29.6.2008 with effect in relation to financial years beginning on or after that date) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), reg. 1(2), Sch. para. 2

PART IV U.K. SPECIAL RULES FOR BALANCE SHEET FORMAT

Commencement Information

I20 Sch. 2 Pt. IV in force at 1.9.1994, see reg. 1

Additional items U.K.

1.  A society which carries on long term business must show separately, in the balance sheet or in the notes to the accounts, the total amount of assets representing the long term fund valued in accordance with the provisions of this Schedule.

Managed funds U.K.

2.—(1) For the purposes of this paragraph “managed funds” are funds of a group pension fund:

(a) which fall within Class VII of Head A of Schedule 2 to the Act;

(b) which the society administers in its own name but on behalf of others; and

(c) to which the society has legal title.

(2) The society must in any case where assets and liabilities arising in respect of managed funds fall to be treated as assets and liabilities of the society, adopt the following accounting treatment: assets and liabilities representing managed funds are to be included in the society’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 item in respect of such assets or (as the case may be) liabilities.

Deferred acquisition costs U.K.

3.  The costs of acquiring insurance policies which are incurred during a financial year but which relate to a subsequent financial year must be deferred in a manner specified in Note (16) on the balance sheet format.

Regulations 4 and 5

SCHEDULE 3 U.K. FORM AND CONTENT OF THE ANNUAL ACCOUNTS OF A GROUP ACCOUNTS SOCIETY

General Rules U.K.

1.—(1) The consolidated income and expenditure account and the consolidated balance sheet must incorporate in full the information contained in the individual accounts of the subsidiaries included in the consolidation, subject to the adjustments authorised or required by the following provisions of this Schedule and to such other adjustments (if any) as may be appropriate in accordance with generally accepted accounting principles or practice.

(2) If the financial year of a subsidiary included in the consolidation differs from that of the society, the group accounts must be made up:

(a) from the accounts of the subsidiary for its financial year last ending before the end of the society’s financial year, provided that year ended no more than three months before that of the society; or

(b) from interim accounts prepared by the subsidiary as at the end of the parent society’s financial year.

Commencement Information

I21 Sch. 3 para. 1 in force at 1.9.1994, see reg. 1

2.—(1) Where assets and liabilities to be included in the consolidated balance sheet have been valued or otherwise determined by a subsidiary according to accounting rules differing from those used in the annual accounts of a group accounts society, the values or amounts must be adjusted so as to accord with the rules used for the annual accounts of the group accounts society.

(2) If it appears to the committee of management of the society that there are special reasons for departing from the requirements of sub-paragraph (1) they may do so, but particulars of any such departure, the reasons for it and its effect must be given in a note to the accounts.

(3) The adjustments referred to in this paragraph need not be made if they are not material for the purpose of giving a true and fair view for the society and its subsidiary as a whole of the matters set out in subsections (2) and (3) of section 70 of the Act.

Commencement Information

I22 Sch. 3 para. 2 in force at 1.9.1994, see reg. 1

3.  Any differences of accounting rules as between a society’s individual accounts for a financial year and its consolidated accounts must be disclosed in a note to the accounts and the reasons for the differences given. U.K.

Commencement Information

I23 Sch. 3 para. 3 in force at 1.9.1994, see reg. 1

4.  Amounts which in the particular context of any provision of this Schedule are not material may be disregarded for the purposes of that provision. U.K.

Commencement Information

I24 Sch. 3 para. 4 in force at 1.9.1994, see reg. 1

Elimination of group transactions U.K.

5.—(1) Debts and claims between subsidiaries included in the consolidation, and income and expenditure relating to transactions between such subsidiaries, must be eliminated in preparing the consolidated accounts.

(2) Where profits and losses resulting from transactions between subsidiaries included in the consolidation are included in the book value of assets, they must be eliminated in preparing the group accounts.

(3) The elimination required by subparagraph (2) may be effected in proportion to the society’s interest in the shares of the subsidiaries.

(4) Subparagraphs (1) and (2) need not be complied with:

(a) where a transaction has been concluded according to normal market conditions and a policy holder has rights in respect of that transaction; or

(b) if the amounts concerned are not material for the purpose of giving a true and fair view.

(5) Where advantage is taken of sub-paragraph (4)(a) above that fact must be disclosed in the notes to the accounts, and where the transaction in question has a material effect on the assets, liabilities, financial position and profit or loss of all the subsidiaries included in the consolidation that fact must also be so disclosed.

Commencement Information

I25 Sch. 3 para. 5 in force at 1.9.1994, see reg. 1

Acquisition accounting U.K.

6.—(1) The following provisions apply where a body corporate becomes a subsidiary of the society.

(2) That event is referred to in those provisions as an “acquisition”, and references to the “body corporate acquired” must be construed accordingly.

Commencement Information

I26 Sch. 3 para. 6 in force at 1.9.1994, see reg. 1

7.  An acquisition must be accounted for by the acquisition method of accounting.

Commencement Information

I27 Sch. 3 para. 7 in force at 1.9.1994, see reg. 1

8.—(1) The acquisition method of accounting is as follows.

(2) The identifiable assets and liabilities of the body corporate acquired must be included in the consolidated balance sheet at their fair values as at the date of acquisition.

(3) In this paragraph the “identifiable” assets or liabilities of the body corporate acquired means the assets or liabilities which are capable of being disposed of or discharged separately, without disposing of a business of the body corporate.

(4) The income and expenditure of the body corporate acquired must be brought into the annual accounts of a group accounts society only as from the date of the acquisition.

(5) There must be set off against the acquisition cost of the interest in the shares of the body corporate held by the society and its subsidiaries, the interest of the society and its subsidiaries in the adjusted capital and reserves of the body corporate acquired, and for this purpose:

“the acquisition cost” means the amount of any cash consideration and the fair value of any other consideration, together with such amount (if any) in respect of fees and other expenses of the acquisition as the society may determine; and

“the adjusted capital and reserves” of the body corporate acquired means its capital and reserves at the date of the acquisition after adjusting the identifiable assets and liabilities of the body corporate to fair value as at that date.

(6) The resulting amount must be treated, if positive, as goodwill, and if negative as a negative consolidation difference.

Commencement Information

I28 Sch. 3 para. 8 in force at 1.9.1994, see reg. 1

9.—(1) The following information with respect to acquisitions taking place in the financial year must be given in a note to the accounts:

(a) the name of the body corporate acquired; and

(b) whether the acquisition was accounted for by the acquisition method.

(2) In relation to an acquisition which significantly affects the figures shown in the annual accounts of a group accounts society the following further information must be given:

(a) the composition and fair value of the consideration for the acquisition given by the society and its subsidiaries;

(b) the profit and loss of the body corporate or group acquired:

(i) for the period from the beginning of the financial year of the body corporate up to the date of the acquisition;

(ii) for the previous financial year of that body corporate; and

(iii) the date on which the financial year referred to in (i) began; and

(c) where the acquisition method of accounting has been adopted, the book values immediately prior to the acquisition, and the fair values at the date of acquisition, of each class of assets and liabilities of the body corporate acquired, in tabular form, including a statement of the amount of any goodwill or negative consolidation difference arising on the acquisition, together with an explanation of any significant adjustments made.

(3) In ascertaining for the purposes of subparagraph (2)(b) and (2)(c) the profit or loss of a group, the book values and fair values of assets and liabilities of a group or the amount of the assets and liabilities of a group, the set offs and other adjustments required by this schedule in the case of the annual accounts of a group accounts society must be made.

Commencement Information

I29 Sch. 3 para. 9 in force at 1.9.1994, see reg. 1

10.—(1) There must be stated in a note to the accounts the cumulative amount of goodwill resulting from acquisitions in that and earlier financial years which has been written off.

(2) That figure must be shown net of any goodwill attributable to subsidiaries disposed of prior to the balance sheet date.

Commencement Information

I30 Sch. 3 para. 10 in force at 1.9.1994, see reg. 1

11.  Where during the financial year there has been a disposal of a subsidiary which significantly affects the figures shown in the annual accounts of a group accounts society, there must be stated in a note to the accounts:

(a) the name of that subsidiary; and

(b) the extent to which the income or expenditure shown in the group accounts is attributable to profit or loss of the subsidiaries.

Commencement Information

I31 Sch. 3 para. 11 in force at 1.9.1994, see reg. 1

12.  The information required by paragraphs 9, 10, or 11 need not be disclosed with respect to a subsidiary which:

(a) is established under the law of a country outside the United Kingdom; or

(b) carries on business outside the United Kingdom,

if in the opinion of the committee of management of the society the disclosure would be seriously prejudicial to the business of that subsidiary or to the business of the society or any of its subsidiaries and the [F11 appropriate authority] agrees that the information should not be disclosed.

Textual Amendments

F11 Words in Sch. 3 para. 12 substituted (1.4.2013) by The Financial Services Act 2012 (Mutual Societies) Order 2013 (S.I. 2013/496), art. 1(1), Sch. 10 para. 6 (with Sch. 12)

Commencement Information

I32 Sch. 3 para. 12 in force at 1.9.1994, see reg. 1

Minority interests U.K.

13.—(1) Under item 10b of the non-technical account in Part II of Schedule 1 must be shown the amount of any income or expenditure on ordinary activities attributable to shares in subsidiaries included in the consolidation held by or on behalf of persons other than the society and its subsidiaries.

(2) Under item 14c of the non-technical account in Part II of Schedule 1 must be shown the amount of any gain or loss on extraordinary activities attributable to shares in subsidiaries included in the consolidation held by or on behalf of persons other than the society and its subsidiaries.

(3) Under Liability item A IV in Part II of Schedule 2 must be shown the amount of capital and reserves attributable to shares in subsidiaries included in the consolidation held by or on behalf of persons other than the society and its subsidiaries.

Commencement Information

I33 Sch. 3 para. 13 in force at 1.9.1994, see reg. 1

Regulation 8

SCHEDULE 4 U.K. NOTES TO ANNUAL ACCOUNTS

Accounting policies U.K.

1.—(1) There must be stated the accounting policies (including such policies with respect to the depreciation and diminution in value of the assets of the society) adopted by the society in determining the amounts to be included in respect of items shown in the income and expenditure accounts and the balance sheet.

(2) It must be stated whether the accounts have been prepared in accordance with applicable accounting standards; particulars of any material departure from these standards and the reasons for such departure must be given.

Sums denominated in foreign currencies U.K.

2.  Where any sums originally denominated in foreign currency have been brought into account under any items shown in the balance sheet and income and expenditure account, the basis on which those sums have been translated into sterling must be stated.

Staff U.K.

F12 3.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Aggregate amount of committee members' emoluments U.K.

F12 4.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Details of chairman’s and committee members' emoluments U.K.

F12 5.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Emoluments waived U.K.

F12 6.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Pensions of committee members and past committee members U.K.

F12 7.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Compensation to committee members for loss of office U.K.

F12 8.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Sums paid to third parties in respect of committee members' services U.K.

F12 9.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Supplementary provisions regarding committee members' emoluments U.K.

F12 10.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

F12 11.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

F12 12.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

F12 13.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Interpretation of provisions regarding committee members' emoluments U.K.

F12 14.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F12 Sch. 4 paras. 3-14 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(a)

Assets U.K.

15.—(1) In respect of any assets of the society included in Assets items A (intangible assets), B.I (land and buildings) and B.II (investment in jointly controlled bodies and subsidiaries) in the society’s balance sheet the following information must be given by reference to each such item:

(a) the appropriate amounts in respect of those assets included in the item as at the date of the beginning of the financial year and as at the balance sheet date respectively;

(b) the effect on any amount included in Assets item A in respect of those assets of:

(i) any determination during that year of the value to be ascribed to any of those assets in accordance with paragraph 11 of Schedule 6 below;

(ii) acquisitions during that year of any assets;

(iii) disposals during that year of any assets; and

(iv) any transfers of assets of the society to and from the item during that year.

(2) The reference in subparagraph (1)(a) to the appropriate amounts in respect of any assets (included in an assets item) as at any date there mentioned is a reference to amounts representing the aggregate amounts determined, as at that date, in respect of assets falling to be included under the item on either of the following bases, that is to say:

(a) on the basis of cost (determined in accordance with paragraphs 27 and 28 of Schedule 6 below); or

(b) on any basis permitted by paragraph 10 or 11 of Schedule 6 below (leaving out of account in either case any provisions for depreciation or diminution in value).

(3) In addition, in respect of any assets of the society included in any assets item in the society’s balance sheet, there must be stated (by reference to each such item):

(a) the cumulative amount of provisions for depreciation or diminution in value of those assets included under the item as at each date mentioned in sub-paragraph (1)(a);

(b) the amount of any such provisions made in respect of the financial year;

(c) the amount of any adjustments made in respect of any such provisions during that year in consequence of the disposal of any of those assets; and

(d) the amount of any other adjustments made in respect of any such provisions during that year.

Commencement Information

I34 Sch. 4 para. 15 in force at 1.9.1994, see reg. 1

16.  Where any assets of the society (other than listed investments) are included under any item shown in the society’s balance sheet at an amount determined on any basis mentioned in paragraph 10 or 11 of Schedule 6 below, the following information must be given:

(a) the years (so far as they are known to the committee member) in which the assets were severally valued and the several values; and

(b) in the case of assets that have been valued during the financial year, the names of the persons who valued them or particulars of their qualifications for doing so and (whichever is stated) the bases of valuation used by them.

Commencement Information

I35 Sch. 4 para. 16 in force at 1.9.1994, see reg. 1

17.  In relation to any amount which is included under Asset item B.I (land and buildings) there must be stated:

(a) how much of that amount is ascribable to land of freehold tenure and how much to land of leasehold tenure;

(b) how much of the amount ascribable to land of leasehold tenure is ascribable to land held on long lease and how much to land held on short lease; and

(c) how much of that amount is ascribable to land and buildings occupied by the society for its own activities.

Commencement Information

I36 Sch. 4 para. 17 in force at 1.9.1994, see reg. 1

Investments U.K.

18.—(1) In respect of the amount of each item which is shown in the society’s balance sheet under Assets item B (investments), or in the case of a non-directive society’s balance sheet, Assets item A (investments), there must be stated:

(a) how much of that amount is ascribable to listed investments; and

(b) how much of any amount so ascribable is ascribable to investments as respects which there has been granted a listing on [F13 a recognised investment exchange within the meaning of the Financial Services and Markets Act 2000, other than an investment exchange in relation to which a recognition order under section 292(2) of that Act is in force (an overseas investment exchange)] and how much to other listed investments.

(2) In the case of each amount shown in respect of listed securities, under sub-paragraph (1)(a), there must also be given the aggregate market value of the securities if it differs from the amount shown.

Textual Amendments

F13 Words in Sch. 4 para. 18(1)(b) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649), arts. 1, 466(a)

Commencement Information

I37 Sch. 4 para. 18 in force at 1.9.1994, see reg. 1

Reserves and provisions U.K.

19.—(1) Where any amount is transferred:

(a) to or from any reserves;

(b) to any [F14 provisions for liabilities]; or

(c) from any [F15 provisions for liabilities] otherwise than for the purpose for which the provision was established,

and the reserves or provisions are or would but for regulation 6(3) above be shown as separate items in the society’s balance sheet, the information mentioned in the following sub-paragraph must be given in respect of the aggregate of reserves or provisions included in items in the balance sheet to which any such transfer relates.

(2) That information required by this paragraph is:

(a) the amount of the reserves or provisions as at the date of the beginning of the financial year and as at the balance sheet date respectively; and

(b) any amounts transferred to or from the reserves or provisions during that year.

(3) Particulars must be given of each provision included in Liabilities item E.3 (other provisions) in the society’s balance sheet in any case where the amount of that provision is material.

Textual Amendments

F14 Words in Sch. 4 para. 19(1)(b) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(6)

F15 Words in Sch. 4 para. 19(1)(c) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(6)

Commencement Information

I38 Sch. 4 para. 19 in force at 1.9.1994, see reg. 1

Provision for taxation U.K.

20.  The amount of any provision for deferred taxation much be stated separately from the amount of any provision for other taxation.

Commencement Information

I39 Sch. 4 para. 20 in force at 1.9.1994, see reg. 1

Details of indebtedness U.K.

21.—(1) In respect of each item shown under “creditors” in the society’s balance sheet there must be stated:

(a) the aggregate amount of any debts included under that item which are payable or repayable otherwise than by instalments and fall due for payment or repayment after the end of the period of five years beginning with the day next following the end of the financial year; and

(b) the aggregate amount of any debts so included which are payable or repayable by instalments any of which fall due for payment after the end of that period, and in the case of debts within sub-paragraph (b) above the aggregate amount of instalments falling due after the end of that period must also be disclosed for each such item.

(2) Subject to sub-paragraph (3), in relation to each debt falling to be taken into account under sub-paragraph (1), the terms of payment or repayment and the rate of any interest payable on the debt must be stated.

(3) If the number of debts is such that, in the opinion of the committee members, compliance with sub-paragraph (2) would result in a statement of excessive length, it must be sufficient to give a general indication of the terms or repayment and the rates of any interest payable on the debts.

(4) In respect of each item shown under “creditors” in the society’s balance sheet there must be stated:

(a) the aggregate amount of any debts included under that item in respect of which any security has been given by the society; and

(b) an indication of the nature of the securities so given.

(5) References above in this paragraph to an item shown under “creditors” in the society’s balance sheet include references, where amounts falling due to creditors within one year and after more than one year are distinguished in the balance sheet:

(a) in a case within sub-paragraph (1), to an item shown under the latter of those categories; and

(b) in a case within sub-paragraph (4), to an item shown under either of those categories,

and references to items shown under “creditors” include references to items which would but for Regulation 6(3) above be shown under that heading.

Commencement Information

I40 Sch. 4 para. 21 in force at 1.9.1994, see reg. 1

Guarantees and other financial commitments U.K.

22.—(1) Particulars must be given of any charge on the assets of the society to secure the liabilities of any other person, including, where practicable, the amount secured.

(2) The following information must be given with respect to any other contingent liability not provided for (other than a contingent liability arising out of an insurance contract):

(a) the amount or estimated amount of that liability;

(b) its legal nature;

(c) whether any valuable security has been provided by the society in connection with that liability and if so, what.

(3) There must be stated, where practicable:

(a) the aggregate amount or estimated amount of contracts for capital expenditure, so far as not provided for in the balance sheet; and

(b) the aggregate amount or estimated amount of capital expenditure authorised by the committee of management which has not been contracted for.

(4) Particulars must be given of:

(a) any pension commitments included under any provision shown in the society’s balance sheet; and

(b) any such commitments for which no provision has been made,

and where any such commitment relates wholly or partly to pensions payable to past committee members of the society separate particulars must be given of that commitment so far as it relates to such pensions.

(5) Particulars must also be given of any other financial commitments, other than commitments arising out of insurance contracts, which:

(a) have not been provided for in the balance sheet; and

(b) are relevant to assessing the society’s state of affairs.

(6) Commitments within any of the preceding subparagraphs undertaken on behalf of or for the benefit of any subsidiary of the society, must be stated separately from the other commitments.

Commencement Information

I41 Sch. 4 para. 22 in force at 1.9.1994, see reg. 1

Dealings with or interests in subsidiaries and jointly controlled bodies U.K.

23.  Where a society is required by Part I of Schedule 2 to be shown in the society’s balance sheet in relation to its subsidiary and jointly controlled bodies includes:

(a) amounts attributable to dealings with or interests in subsidiary or jointly controlled body; or

(b) amounts attributable to dealings with or interests in any subsidiary of the society,

the aggregate amounts within paragraphs (a) and (b) respectively must be shown as separate items, either by way of subdivision of the relevant item in the balance sheet or in a note to the society’s accounts.

Commencement Information

I42 Sch. 4 para. 23 in force at 1.9.1994, see reg. 1

Separate statement of certain items of income and expenditure U.K.

24.—(1) Subject to the following provisions of this paragraph, each of the amounts mentioned below must be stated.

(2) The amount of the interest or any similar charges in respect of:

(a) bank loans and overdrafts, and loans made to the society (other than bank loans and overdrafts) which:

(i) are repayable otherwise than by instalments and fall due for repayment before the end of the period of five years beginning with the day next following the end of the financial year; or

(ii) are repayable by instalments the last of which falls due for payment before the end of that period; and

(b) loans of any other kind made to the society.

• This sub-paragraph does not apply to interest or charges on loans to the society from jointly controlled bodies and subsidiaries, but, with that exception, it applies to interest or charges on all loans, whether made on the security of debenture or not.

(3) The amount of income from listed investments.

(4) The amount charged to revenue in respect of sums payable in respect of the hire of plant and machinery and vehicles.

Commencement Information

I43 Sch. 4 para. 24 in force at 1.9.1994, see reg. 1

Taxation U.K.

25.—(1) The basis on which the charge for United Kingdom corporation tax and deferred tax is computed must be stated.

(2) Particulars must be given of any special circumstances which affect liability in respect of taxation of income or capital gains for the financial year or liability in respect of taxation of income or capital gains for succeeding financial years.

(3) The following amounts must be stated:

(a) the amount of the charge for United Kingdom corporation tax;

(b) if that amount would have been greater but for relief from double taxation, the amount which it would have been but for such relief; and

(c) the amount of the charge for taxation imposed outside the United Kingdom of income and (so far as charged to revenue) capital gains.

• Those amounts must be stated separately in respect of each of the amounts which is shown under the following items in the income and expenditure account, that is to say item III.9 (tax on ordinary activities) and item III.14 (tax on extraordinary gain or loss).

Commencement Information

I44 Sch. 4 para. 25 in force at 1.9.1994, see reg. 1

Particulars of business U.K.

26.—(1) As regards general business a society must disclose:

(a) gross premiums written;

(b) gross premiums earned;

(c) gross claims incurred;

(d) gross operating expenses; and

(e) the reinsurance balance.

(2) The amounts required to be disclosed by sub-paragraph (1) must be broken down between direct insurance and reinsurance acceptances, if reinsurance acceptances amount to 10 per cent. or more of gross premiums written.

(3) Subject to sub-paragraph (4) below, the amounts required to be disclosed by sub-paragraphs (1) and (2) above with respect to direct insurance must be further broken down into the following groups of classes:

(a) accident;

(b) sickness; and

(c) miscellaneous financial loss,

where the amount of the gross premiums written in direct insurance for each such group exceeds 10 million ECUs.

(4) The society must in any event disclose the amounts relating to the three largest groups of classes in its business.

Commencement Information

I45 Sch. 4 para. 26 in force at 1.9.1994, see reg. 1

27.—(1) As regards long term business, the society must disclose:

(a) gross premiums written; and

(b) the reinsurance balance.

(2) Subject to sub-paragraph (3) below:

(a) gross premiums written must be broken down between those written by way of direct insurance and those written by ways of reinsurance; and

(b) gross premiums written by way of direct insurance must be broken down:

(i) between individual premiums and premiums under group contracts;

(ii) between periodic premiums and single premiums; and

(iii) between premiums from non-participating contracts, premiums from participating contracts and premiums from contracts where the investment risk is borne by members or policy holders.

(3) Disclosure of any amount referred to in sub-paragraph (2)(a) or (2)(b)(i), (ii) or (iii) above must not be required if it does not exceed 10 per cent. of the gross premiums written or (as the case may be) of the gross premiums written by way of direct insurance.

Commencement Information

I46 Sch. 4 para. 27 in force at 1.9.1994, see reg. 1

28.— [F16 (1) Subject to sub-paragraph (2) below, there must be disclosed as regards both general and long term business the total gross direct insurance premiums resulting from contracts concluded by the society in the United Kingdom and other countries.]

(2) Disclosure of any amount referred to in sub-paragraph (1) above would not be required if it does not exceed 5 per cent. of total gross premiums.

Textual Amendments

F16 Sch. 4 para. 28(1) substituted (31.12.2020) by The Friendly Societies (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1039), regs. 1, 16; 2020 c. 1, Sch. 5 para. 1(1)

Commencement Information

I47 Sch. 4 para. 28 in force at 1.9.1994, see reg. 1

Commissions U.K.

29.  There must be disclosed the total amount of commissions for direct insurance business accounted for in the financial year, including acquisition, renewal, collection and portfolio management commissions.

Commencement Information

I48 Sch. 4 para. 29 in force at 1.9.1994, see reg. 1

Miscellaneous matters U.K.

30.—(1) Where any amount relating to any preceding financial year is included in any item in the income and expenditure account, the effect must be stated.

(2) Particulars must be given of any extraordinary income or charges arising in the financial year.

(3) The effect must be stated of any transactions that are exceptional by virtue of size or incidence though they fall within the ordinary activities of the society.

(4) Particulars must be given of any case where the cost of any asset is for the first time determined under paragraph 29 of Schedule 6 below.

F17 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F17 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Where management and agency services are provided by the society to third parties that fact must be disclosed where the scale of such services is material in the context of the society’s business as a whole.

Textual Amendments

F17 Sch. 4 para. 30(5)(6) omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(b)

Commencement Information

I49 Sch. 4 para. 30 in force at 1.9.1994, see reg. 1

Committee members' loans and transactions U.K.

F18 31.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F18 Sch. 4 para. 31 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 4(c)

Industrial Assurance U.K.

F19 32.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F19 Sch. 4 para. 32 revoked (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments and Repeals) Order 2001 (S.I. 2001/3649), arts. 1, 466(b)

[F20 Information about fair value of assets and liabilities U.K.

33.— (1) This paragraph applies where financial instruments have been valued in accordance with paragraph 24A or 24C of Schedule 6.

(2) There shall be stated in the notes to the accounts –

(a) the significant assumptions underlying the valuation models and techniques used where the fair value of the instruments has been determined in accordance with paragraph 24B(4) of that Schedule;

(b) for each category of financial instrument, the fair value of the instruments in that category and the changes in their value –

(i) included in the income and expenditure account, and

(ii) ii)credited to or (as the case may be) debited from the fair value reserve,

in respect of instruments in that category; and

(c) for each class of derivative financial instruments, the extent and nature of the instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows.

(3) Where any amount is transferred to or from the fair value reserve during the financial year, there shall be stated in tabular form –

(a) the amount of the reserve as at the date of the beginning of the financial year and as at the balance sheet date respectively;

(b) the amount transferred to or from the reserve during that year; and

(c) the source and application respectively of the amounts so transferred.

(4) Where investments are shown at their purchase price, their fair value shall be disclosed in the notes on the accounts.

(5) Where investments are shown at their fair value, their purchase price shall be disclosed in the notes to the accounts.

(6) The valuation method applied to each investment item shall be stated in the notes to the accounts, together with the amounts so determined.

Textual Amendments

F20 Sch. 4 paras. 33, 34 inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 3

Information where investment property or living animals and plants included at fair value U.K.

34.— (1) This paragraph applies where the amounts to be included in a society’s accounts in respect of investment property or living animals and plants have been determined in accordance with paragraph 24D.

(2) The balance sheet 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 investment property, for each balance sheet item affected there shall be shown, either separately in the balance sheet or in a note to the accounts –

(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.

(4) In sub-paragraph (3) above, references in relation to any item to the comparable amounts determined in accordance with that sub-paragraph 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.]

Textual Amendments

F20 Sch. 4 paras. 33, 34 inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 3

[F21 Related Party Transactions U.K.

35.— (1) Particulars may be given of transactions which the society has entered into with related parties, and must be given if such transactions are material and have not been concluded under normal market conditions.

(2) The particulars of transactions required to be disclosed by sub-paragraph (1) must include—

(a) the amount of such transactions,

(b) the nature of the related party relationship,

(c) other information about the transactions necessary for an understanding of the financial position of the society.

(3) Information about individual transactions may be aggregated according to their nature, except where separate information is necessary for an understanding of the effects of related party transactions on the financial position of the society.

(4) Particulars need not be given of transactions entered into between two or more members of a group, provided that any subsidiary undertaking which is a party to the transaction is wholly-owned by such a member.

(5) In this paragraph—

“group” means a society and its subsidiary undertakings;

“related party” has the same meaning as in international accounting standards.]

Textual Amendments

F21 Sch. 4 para. 35 inserted (29.6.2008 with effect in relation to financial years beginning on or after that date) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 5

Regulation 9

F22 SCHEDULE 5 U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F22 Sch. 5 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 6

Regulation 10

SCHEDULE 6 U.K. ACCOUNTING PRINCIPLES AND RULES

PART I U.K. ACCOUNTING PRINCIPLES

Preliminary U.K.

1.  Subject to paragraph 7 below, the amounts to be included in respect of all items shown in a society’s annual accounts must be determined in accordance with the principles set out in paragraphs 2 to 6 below.

Commencement Information

I50 Sch. 6 para. 1 in force at 1.9.1994, see reg. 1

Accounting principles U.K.

2.  The society is presumed to be carrying on business as a going concern, and so, where group accounts are prepared, is the society and its subsidiaries.

Commencement Information

I51 Sch. 6 para. 2 in force at 1.9.1994, see reg. 1

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

Commencement Information

I52 Sch. 6 para. 3 in force at 1.9.1994, see reg. 1

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

(a) Subject to note (9) on the income and expenditure accounts format, only income arising by the balance sheet date must be included in the income and expenditure account; and

(b) all liabilities F23 ... which have arisen F23 ... in respect of the financial year to which the accounts relate or a previous financial year must 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 committee of management in pursuance of section 76 of the Act.

Textual Amendments

F23 Words in Sch. 6 para. 4(b) omitted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 2(7)

Commencement Information

I53 Sch. 6 para. 4 in force at 1.9.1994, see reg. 1

5.  Except so far as these Regulations otherwise specify, income and charges relating to the financial year to which the accounts relate must be taken into account, without regard to the date of receipt or payment.

Commencement Information

I54 Sch. 6 para. 5 in force at 1.9.1994, see reg. 1

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

Commencement Information

I55 Sch. 6 para. 6 in force at 1.9.1994, see reg. 1

PART II U.K. DEPARTURE FROM ACCOUNTING PRINCIPLES

7.  If it appears to the committee of management of a society that there are special reasons for departing from any of the principles stated above in preparing annual accounts in respect of any financial year, they may do so, but particulars of the departure, the reasons for it, and its effect must be given in a note to the accounts. U.K.

Commencement Information

I56 Sch. 6 para. 7 in force at 1.9.1994, see reg. 1

PART III U.K. CURRENT VALUE ACCOUNTING RULES

Preliminary U.K.

8.—(1) Subject to paragraphs 15 to 17 below:

(a) the amounts to be included in respect of assets of any description mentioned in paragraph 10 below [F24 may be determined in accordance with that paragraph or with paragraphs 24A, 24C or 24D]; and

(b) subject to paragraph 9 below, the amounts to be included in respect of assets of any description mentioned in paragraph 11 below may be determined in accordance with that paragraph or the rules set out in paragraphs 18 to 31 below (“the historical cost accounting rules”) [F25 or with paragraphs 24A, 24C or 24D].

Textual Amendments

F24 Words in Sch. 6 para. 8(1)(a) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 4(2)

F25 Words in Sch. 6 para. 8(1)(b) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 4(3)

Commencement Information

I57 Sch. 6 para. 8 in force at 1.9.1994, see reg. 1

9.  The same valuation method must be applied to all investments included in any item in the balance sheet format which is denoted by an arabic number [F26 or shown as assets under CI in the balance sheet].

Textual Amendments

F26 Words in Sch. 6 para. 9 inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 4(4)

Commencement Information

I58 Sch. 6 para. 9 in force at 1.9.1994, see reg. 1

Valuation of assets: general U.K.

10.—(1) Subject to paragraph 12 below, investments falling to be included under Assets item B (investments) must be included at their current value calculated in accordance with paragraphs 13 and 14 below.

(2) Investments falling to be included under Assets item C (assets held to cover linked liabilities) must be shown at their current value calculated in accordance with paragraphs 13 and 14 below.

Commencement Information

I59 Sch. 6 para. 10 in force at 1.9.1994, see reg. 1

11.—(1) Intangible assets other than goodwill may be shown at their current cost.

(2) Assets falling to be included under Assets items F.I (tangible assets) in the balance sheet format may be shown at their current value calculated in accordance with paragraphs 13 and 14 below or at their current cost.

(3) Assets falling to be included under Assets item F.II (stocks) may be shown at current cost.

Commencement Information

I60 Sch. 6 para. 11 in force at 1.9.1994, see reg. 1

Alternative valuation of fixed-income securities U.K.

12.—(1) This paragraph applies to debt securities and other fixed-income securities shown as assets under Assets items B.II (investments in associated bodies) and B.III (other financial investments).

(2) Securities to which this paragraph applies may either be valued in accordance with paragraph 10 [F27 ,24A, 24C or 24D,] or their amortised value may be shown in the balance sheet, in which case the provisions of this paragraph apply.

(3) Subject to sub-paragraph (4) below, where the purchase price of securities to which this paragraph applies exceeds the amount repayable at maturity, the amount of the difference:

(a) must be charged to the income and expenditure account; and

(b) must be shown separately in the balance sheet or in the notes to the accounts.

(4) The amount of the difference referred to in sub-paragraph (3) above may be written off in instalments so that it is completely written off when the securities are repaid, in which case there must be shown separately in the balance sheet or in the notes to the accounts the difference between the purchase price (less the aggregate amount written off) and the amount repayable at maturity.

(5) Where the purchase price of securities to which this paragraph applies is less than the amount repayable at maturity, the amount of the difference must be released to income in instalments over the period remaining until repayment, in which case there must be shown separately in the balance sheet or in the notes to the accounts the difference between the purchase price (plus the aggregate amount released to income) and the amount repayable at maturity.

(6) Both the purchase price and the current value of securities valued in accordance with this paragraph must be disclosed in the notes to the accounts.

(7) Where securities to which this paragraph applies which are not valued in accordance with paragraph 10 above are sold before maturity, and the proceeds are used to purchase other securities to which this paragraph applies, the difference between the proceeds of sale and their book value may be spread uniformly over the period remaining until the maturity of the original investment.

Textual Amendments

F27 Words in Sch. 6 para. 12(2) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 4(5)

Commencement Information

I61 Sch. 6 para. 12 in force at 1.9.1994, see reg. 1

Meaning of “current value” U.K.

13.—(1) Subject to sub-paragraph (5) below, in the case of investments other than land and buildings, current value must mean market value determined in accordance with this paragraph.

(2) In the case of listed investments, market value must mean the value on the balance sheet date or, when the balance sheet date is not a stock exchange trading day, on the last stock exchange trading day before that date.

(3) Where a market exists for unlisted investments, market value must mean the average price at which such investments were traded on the balance sheet date or, when the balance sheet date is not a trading day, on the last trading day before that date.

(4) Where, on the date on which the accounts are drawn up, listed or unlisted investments have been sold or are to be sold within the short term, the value must be reduced by the actual or estimated realisation costs.

(5) Except where the equity method of accounting is applied, all investments other than those referred to in sub-paragraphs (2) and (3) above must be valued on a basis which has prudent regard to the likely realisable value.

Commencement Information

I62 Sch. 6 para. 13 in force at 1.9.1994, see reg. 1

14.—(1) In the case of land and buildings, current value must mean the market value on the date of valuation, where relevant reduced as provided in sub-paragraphs (4) and (5) below.

(2) Market value must mean the price at which land and buildings could be sold under private contract between a willing seller and an arm’s length buyer on the date of valuation, it being assumed that the property is publicly exposed to the market, that market conditions permit orderly disposal and that a normal period, having regard to the nature of the property, is available for the negotiation of the sale.

(3) The market value must be determined through the separate valuation of each land and buildings item, carried out at least every five years in accordance with generally recognised methods of valuation.

(4) Where the value of any land and buildings item has diminished since the preceding valuation under sub-paragraph (3), an appropriate value adjustment must be made.

(5) The lower value arrived at under sub-paragraph (4) must not be increased in subsequent balance sheets unless such increase results from a new determination or market value arrived at in accordance with subparagraphs (2) and (3).

(6) Where, on the date on which the accounts are drawn up, land and buildings have been sold or are to be sold within the short term, the value arrived at in accordance with sub-paragraphs (2) and (4) must be reduced by the actual or estimated realisation costs.

(7) Where it is impossible to determine the market value of a land and buildings item, the value arrived at on the basis of the principle or purchase price or production cost must be deemed to be its current value.

Commencement Information

I63 Sch. 6 para. 14 in force at 1.9.1994, see reg. 1

Application of the depreciation rules U.K.

15—(1) Where:

(a) the value of any asset of a society is determined in accordance with paragraph 10 or 11 above; and

(b) in the case of a determination under paragraph 10 above, the asset falls to be included under Assets item B.I.,

the value must 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 society’s accounts, instead of its cost or any value previously so determined for that asset; and paragraphs 19, 23 and 25 below must 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 10 or 11 above (as the case may be).

(2) The amount of any provision for depreciation required in the case of any asset by paragraph 20 or 21 below as it applies by virtue of sub-paragraph (1) is referred to below 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 asset the amount of any provision for depreciation in respect of that asset included in any item shown in the income and expenditure 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 income and expenditure account or in a note to the accounts.

Commencement Information

I64 Sch. 6 para. 15 in force at 1.9.1994, see reg. 1

16.—(1) This paragraph applies where the amounts to be included in respect of assets covered by any items shown in a society’s accounts have been determined in accordance with paragraph 10 or 11 above.

(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 must be disclosed in a note to the accounts.

(3) The purchase price of investments valued in accordance with paragraph 10 above must be disclosed in the notes to the accounts.

(4) In the case of each balance sheet item valued in accordance with paragraph 11 above either:

(a) the comparable amounts determined according to the historical cost accounting rules (without any provision for depreciation or diminution in value); or

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

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

(5) In sub-paragraph (4) above, 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.

Commencement Information

I65 Sch. 6 para. 16 in force at 1.9.1994, see reg. 1

Revaluation reserve U.K.

17.—(1) Subject to sub-paragraph (6) below, with respect to any determination of the value of an asset of a society in accordance with paragraph 10 or 11 above, the amount of any gain 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) must be credited or (as the case may be) debited to a separate reserve (“the revaluation reserve”).

(2) The amount of the revaluation reserve must be shown in the society’s balance sheet under Liabilities item A.I, but need not be shown under the name “revaluation reserve”.

(3) An amount may be transferred from the revaluation reserve to the income and expenditure account, if the amount was previously charged to that account and the revaluation reserve must be reduced to the extent that the amounts transferred to it are no longer necessary for the purposes of the valuation method used.

(4) The revaluation reserve must not be reduced except as mentioned in this paragraph.

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

(6) This paragraph does not apply to the difference between the valuation of investments and their purchase price or previous valuation shown in the long term business technical account or the non-technical account in accordance with note (9) on the income and expenditure account format.

Commencement Information

I66 Sch. 6 para. 17 in force at 1.9.1994, see reg. 1

PART IV U.K. HISTORICAL COST ACCOUNTING RULES

Preliminary U.K.

18.  Subject to paragraphs 8 to 17 above, the amounts to be included in respect of all items shown in a society’s accounts must be determined in accordance with the rules set out in paragraphs 19 to 31 below. U.K.

Commencement Information

I67 Sch. 6 para. 18 in force at 1.9.1994, see reg. 1

Valuation of assets U.K.

General rules U.K.

19.  Subject to any provision for depreciation or diminution in value made in accordance with paragraph 20 or 21 below, the amount to be included in respect of any asset in the balance sheet format must be its cost.

Commencement Information

I68 Sch. 6 para. 19 in force at 1.9.1994, see reg. 1

20.  In the case of any asset included under Assets item A (intangible assets), B.I (land and buildings), F.I. (tangible assets) or F.II (stocks) 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,

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

Commencement Information

I69 Sch. 6 para. 20 in force at 1.9.1994, see reg. 1

21.—(1) This paragraph applies to any asset included under Assets item A (tangible assets), B (investments) or F.I (tangible assets).

(2) Where an asset to which this paragraph applies 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 income and expenditure account must be disclosed (either separately or in aggregate) in a note to the accounts.

(3) Provisions for diminution in value must be made in respect of any asset to which this paragraph applies 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 must be reduced accordingly; and any such provisions which are not shown in the income and expenditure account must be disclosed (either separately or in aggregate) in a note to the accounts.

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

Commencement Information

I70 Sch. 6 para. 21 in force at 1.9.1994, see reg. 1

22.—(1) This paragraph applies to assets included under Assets items E.I., II, and III (debtors) and F.III (cash at bank and in hand) in the balance sheet.

(2) If the net realisable value of an asset to which this paragraph applies is lower than its cost the amount to be included in respect of that asset must be the net realisable value.

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

Commencement Information

I71 Sch. 6 para. 22 in force at 1.9.1994, see reg. 1

Development costs U.K.

23.—(1) Notwithstanding that amounts representing “development costs” may be included under Assets item A (intangible assets) in the balance sheet format, an amount may only be included in a society’s balance sheet in respect of development costs in special circumstances.

(2) If any amount is included in a society’s balance sheet in respect of development costs the following information must 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.

Commencement Information

I72 Sch. 6 para. 23 in force at 1.9.1994, see reg. 1

Goodwill U.K.

24.—(1) The application of paragraphs 19 to 21 above 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) below, the amount of the consideration of any goodwill acquired by a society must be reduced by provisions for depreciation calculated to write off that amount systematically over a period chosen by the committee of management.

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

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

Commencement Information

I73 Sch. 6 para. 24 in force at 1.9.1994, see reg. 1

Part IVA U.K. [F28 Valuation at Fair Value

Textual Amendments

F28 Sch. 6 Pt. 4A inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 5

Inclusion of financial instruments at fair value U.K.

24A.— (1) Subject to sub-paragraphs (2) to (4), financial instruments, including derivative financial instruments, may be included at fair value.

(2) Sub-paragraph (1) only applies to financial instruments which constitute liabilities if –

(a) they are held as part of a trading portfolio; F29 ...

(b) they are derivative financial instruments [F30 ; or

(c) they are financial instruments falling within sub-paragraph (3A).]

(3) [F31 Unless they are financial instruments falling within sub-paragraph (3A) below,] sub-paragraph (1) does not apply to –

(a) non-derivative financial instruments held to maturity;

(b) loans or receivables originated by the society and not held for trading purposes;

(c) interests in connected undertakings or joint ventures;

(d) equity instruments issued by the society;

(e) contracts for contingent consideration in a business combination; and

(f) other financial instruments with such special characteristics that the instruments, according to generally accepted accounting principles or practice, should be accounted for differently from other financial instruments.

[F32 (3A) Financial instruments which, under [F33 UK-adopted international accounting standards within the meaning of section 474(1) of the Companies Act 2006], may be included in accounts at fair value, may be so included, provided that the disclosures required by such accounting standards are made.]

(4) If the fair value of a financial instrument cannot be determined reliably in accordance with paragraph 24B, sub-paragraph (1) does not apply to that financial instrument.

(5) In this paragraph “joint venture” means an undertaking, other than a connected undertaking, which a society manages jointly with one or more undertakings.

Textual Amendments

F29 Word in Sch. 6 para. 24A(2) omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 7(a)

F30 Sch. 6 para. 24A(2)(b) and word inserted (29.6.2008 with effect in relation to financial years beginning on or after that date) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 7(b)

F31 Words in Sch. 6 para. 24A(3) inserted (29.6.2008 with effect in relation to financial years beginning on or after that date) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 7(c)

F32 Sch. 6 para. 24A(3A) inserted (29.6.2008 with effect in relation to financial years beginning on or after that date) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), regs. 1(2), 7(d)

F33 Words in Sch. 6 para. 24A(3A) substituted (31.12.2020) by The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/685), reg. 1(2), Sch. 1 para. 53 (with reg. 1(3)(4)) (as amended by S.I. 2020/523, regs. 1(2), 22); 2020 c. 1, Sch. 5 para. 1(1)

Methods for determining “fair value” U.K.

24B.— (1) The fair value of a financial instrument is its value determined in accordance with this paragraph.

(2) If a reliable market can readily be identified for the financial instrument, its fair value is to be determined by reference to its market value.

(3) If a reliable market cannot readily be identified for the financial instrument but can be identified for its components or for a similar instrument, its fair value is to be determined by reference to the market value of its components or of the similar instrument.

(4) If neither sub-paragraph (2) nor (3) applies, the fair value of the financial instrument is to be a value resulting from generally accepted valuation models and techniques.

(5) Any valuation models and techniques used for the purposes of sub-paragraph (4) must ensure a reasonable approximation of the market value.

Hedged items U.K.

24C.   A society may include any assets or liabilities, or identified portions of such assets or liabilities, which qualify as hedged items under a fair value hedge accounting system, at the amount required under that system.

Other assets which may be included at fair value U.K.

24D.— (1) This paragraph applies to–

(a) investment property; and

(b) living animals or plants,

that under international accounting standards may be included in accounts at fair value.

(2) Such investment property and such living animals or plants may be included at fair value, provided that all such investment property, or as the case may be, all such living animals or plants are so included where their fair value can be reliably determined.

(3) In this paragraph “fair value” means fair value determined in accordance with relevant accounting standards.

Accounting for changes in value of financial instruments U.K.

24E.— (1) This paragraph applies where a financial instrument is valued in accordance with paragraph 24A or 24C.

(2) Notwithstanding paragraph 4 of Part I of this Schedule, and subject to sub-paragraphs (3) and (4) below, a change in the value of the financial instrument shall be included in the income and expenditure account.

(3) Where–

(a) the financial instrument accounted for is a hedging instrument under a hedge accounting system that allows some or all of the change in value not to be shown in the income and expenditure account; or

(b) the change in value relates to an exchange difference arising on a monetary item that forms part of a society’s net investment in a foreign entity,

the amount of change in value shall be credited to or (as the case may be) debited from a separate reserve (“the fair value reserve”).

(4) Where the instrument accounted for–

(a) is an available-for-sale financial asset; and

(b) is not a derivative financial instrument,

the difference in value may be credited to or (as the case may be) debited from the fair value reserve.

The fair value reserve U.K.

24F.— (1) The fair value reserve shall be adjusted to the extent that the amounts shown in it are no longer necessary for the purposes of paragraph 24E (3) or (4).

(2) The treatment for taxation purposes of amounts credited to or debited from the fair value reserve shall be disclosed in a note to the accounts.]

PART V U.K. MISCELLANEOUS AND SUPPLEMENTAL

Excess of money owed over value received as an asset item U.K.

25.—(1) Where the amount repayable on any debt owed by a society 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 must be written off by reasonable amounts each year and must be completely written off before repayments of the debt; and

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

Commencement Information

I74 Sch. 6 para. 25 in force at 1.9.1994, see reg. 1

Assets included at a fixed amount U.K.

26.—(1) Subject to the following sub-paragraph, assets which fall to be included under Assets item F.I. (tangible assets) in the balance sheet format may be included at a fixed quantity and value.

(2) Sub-paragraph (1) applies to assets of a kind which are constantly being replaced, where:

(a) their overall value is not material to assessing the society’s state of affairs; and

(b) their quantity, value and composition are not subject to material variation.

Commencement Information

I75 Sch. 6 para. 26 in force at 1.9.1994, see reg. 1

Determination of cost U.K.

27.—(1) The cost of an asset that has been acquired by the society must be determined by adding to the actual price paid any expenses incidental to its acquisition.

(2) The cost of an asset constructed by the society must be determined by adding to the purchase price of the raw materials and consumables used the amount of the costs incurred by the society 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 society:

(a) a reasonable proportion of the costs incurred by the society which are only indirectly attributable to the construction of that asset, but only to the extent that they relate to the period of the 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 sub-paragraph (b) above, 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.

Commencement Information

I76 Sch. 6 para. 27 in force at 1.9.1994, see reg. 1

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

• The method chosen must be one which appears to the committee of management to be appropriate in the circumstances of the society.

(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 society:

(a) the cost of assets falling to be included under any item shown in the society’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 must be disclosed in a note to the accounts.

(4) Subject to sub-paragraph (5) below, for the purposes of sub-paragraph (3)(b) above, the relevant alternative amount, in relation to any item shown in a society’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 committee of management to constitute the more appropriate standard of comparison in the case of assets of that class.

Commencement Information

I77 Sch. 6 para. 28 in force at 1.9.1994, see reg. 1

Substitution of original amount where price or cost unknown U.K.

29.  Where there is no record of the purchase price of any asset acquired by a society or of any price, expenses or costs relevant for determining its cost in accordance with paragraph 27 above, or any such record cannot be obtained without unreasonable expense or delay, its cost must be taken for the purposes of paragraphs 19 to 24 above to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the society.

Commencement Information

I78 Sch. 6 para. 29 in force at 1.9.1994, see reg. 1

Assets and liabilities denominated in foreign currencies U.K.

30.—(1) Subject to the following subparagraphs, amounts to be included in respect of assets and liabilities denominated in foreign currencies must be in sterling after translation at an appropriate spot rate of exchange prevailing at the balance sheet date.

(2) An appropriate rate of exchange prevailing on the date of purchase may however be used for assets held as financial fixed assets and assets to be included under asset items A and F1 in Part I or Part II of Schedule 2, if they are not covered or not specifically covered in either the spot or forward currency markets.

(3) An appropriate spot rate of exchange prevailing at the balance sheet date must be used for translating uncompleted spot exchange transactions.

(4) An appropriate forward rate of exchange prevailing at the balance sheet date must be used for translating uncompleted forward exchange transactions.

(5) This paragraph does not apply to assets or liabilities held, or any transaction entered into, for hedging purposes, or to any assets or liabilities which are themselves hedged.

Commencement Information

I79 Sch. 6 para. 30 in force at 1.9.1994, see reg. 1

31.—(1) Subject to subparagraph (2), any difference between the amount to be included in respect of an asset or liability under paragraph 30 and the book value, after translation into sterling at an appropriate rate, of that asset or liability, must be credited or, as the case may be, debited to the income and expenditure account.

(2) In the case however of assets held as financial fixed assets, of assets to be included in asset items A and F1 in Part I or Part II of Schedule 2, and of transactions undertaken to cover such assets, any such difference must be deducted from or credited to the general reserve included in the balance sheet.

Commencement Information

I80 Sch. 6 para. 31 in force at 1.9.1994, see reg. 1

32.  The provisions of this Schedule which relate to long term business apply, with necessary modifications, to business within Classes 1 and 2 of Head B of Schedule 2 to the Act which:

(a) is transacted exclusively or principally according to the technical principles of long term business; and

(b) is a significant amount of the business of the society.

Commencement Information

I81 Sch. 6 para. 32 in force at 1.9.1994, see reg. 1

PART VI U.K. RULES FOR DETERMINING PROVISIONS

Preliminary U.K.

33.  Provisions which are to be shown in a society’s accounts must be determined in accordance with paragraphs 34 to 40 below.

Commencement Information

I82 Sch. 6 para. 33 in force at 1.9.1994, see reg. 1

Technical provisions U.K.

34.  The amount of technical provisions must at all times be sufficient to cover any liabilities arising out of insurance contracts as far as can reasonably be foreseen.

Commencement Information

I83 Sch. 6 para. 34 in force at 1.9.1994, see reg. 1

Provision for unearned premiums U.K.

35.—(1) The provision for unearned premiums must in principle be computed separately for each insurance contract, save that statistical methods (and in particular proportional and flat rate methods) may be used where they may be expected to give approximately the same results as individual calculations.

(2) Where the pattern of risk varies over the life of a contract, this must be taken into account in the calculation methods.

Commencement Information

I84 Sch. 6 para. 35 in force at 1.9.1994, see reg. 1

Provision for unexpired risks U.K.

36.  The provision for unexpired risks (as defined in paragraph 10 of Schedule 9 below) must be computed on the basis of claims and administrative expenses likely to arise after the end of the financial year from contracts concluded before that date, in so far as their estimated value exceeds the provision for unearned premiums and any premiums receivable under those contracts.

Commencement Information

I85 Sch. 6 para. 36 in force at 1.9.1994, see reg. 1

Long term business provision U.K.

37.—(1) The long term business provision must in principle be computed separately for each long term contract, save that statistical or mathematical methods may be used where they may be expected to give approximately the same results as individual calculations.

(2) A summary of the principal assumptions in making the provision under subparagraph (1) must be given in the notes to the accounts.

(3) The computation must be made annually by a Fellow of the Institute or Faculty of Actuaries on the basis of recognised actuarial methods, with due regard to the actuarial principles laid down in the Friendly Societies (Authorisation) Regulations 1994(2).

Commencement Information

I86 Sch. 6 para. 37 in force at 1.9.1994, see reg. 1

Provisions for claims outstanding U.K.

General business U.K.

38.—(1) A provision must in principle be computed separately for each claim on the basis of the costs still expected to arise, save that statistical methods may be used if they result in an adequate provision having regard to the nature of the risks.

(2) This provision must also allow for claims incurred but not reported by the balance sheet date, the amount of the allowance being determined having regard to past experience as to the number and magnitude of claims reported after previous balance sheet dates.

(3) All claims settlement costs (whether direct or indirect) must be included in the calculation of the provision.

(4) Recoverable amounts arising out of subrogation or salvage must be estimated on a prudent basis and either deducted from the provision for claims outstanding (in which case if the amounts are material they must be shown in the notes to the accounts) or shown as assets.

(5) In sub-paragraph (4) above, “subrogation” means the acquisition of the rights of members or policy holders with respect to third parties, and “salvage” means the acquisition of the legal ownership of insured property.

(6) Where benefits resulting from a claim must be paid in the form of annuity, the amounts to be set aside for that purpose must be calculated by recognised actuarial methods, and paragraph 40 below must not apply to such calculations.

(7) Implicit discounting or deductions, whether resulting from the placing of a current value on a provision for an outstanding claim which is expected to be settled later at a higher figure or otherwise effected, is prohibited.

Commencement Information

I87 Sch. 6 para. 38 in force at 1.9.1994, see reg. 1

39.—(1) Explicit discounting or deductions to take account of investment income is permitted, subject to the following conditions:

(a) the expected average interval between the date for the settlement of claims being discounted and the accounting date must be at least four years;

(b) the discounting or deductions must be effected on a recognised prudential basis;

(c) when calculating the total cost of settling claims, the society must take account of all factors that could cause increases in that cost;

(d) the society must have adequate data at its disposal to construct a reliable model of the rate of claims settlements; and

(e) the rate of interest used for the calculation of present values must not exceed a rate prudently estimated to be earned by assets of the society which are appropriate in magnitude and nature to cover the provisions for claims being discounted during the period necessary for the payment of such claims, and must not exceed either:

(i) a rate justified by the performance of such assets over the preceding five years; or

(ii) a rate justified by the performance of such assets during the year preceding the balance sheet date.

(2) When discounting or effecting deductions, the society must, in the notes to the accounts, disclose:

(a) the total amount of provisions before discounting or deductions,

(b) the categories of claims which are discounted or from which deductions have been made; and

(c) for each category of claims, the methods used, in particular the rates used for the estimates referred to in sub-paragraphs (1)(d) and (e), and the criteria adopted for estimating the period that will elapse before the claims are settled.

Commencement Information

I88 Sch. 6 para. 39 in force at 1.9.1994, see reg. 1

Long term business U.K.

40.  The amount of the provision for claims must be equal to the sums due to beneficiaries, plus the costs of settling claims.

Commencement Information

I89 Sch. 6 para. 40 in force at 1.9.1994, see reg. 1

Regulation 11

SCHEDULE 7 U.K. ANNUAL ACCOUNTS OF NON-DIRECTIVE SOCIETY

PART I U.K. FORMAT OF NON-DIRECTIVE SOCIETY INCOME AND EXPENDITURE ACCOUNT

Commencement Information

I90 Sch. 7 Pt. I in force at 1.9.1994, see reg. 1

1.  Income U.K.

(a) Contributions

(b) (i) Rents from Land and Buildings

(ii) Outgoings on Land and Buildings

(c) Interests from:

• Mortgages

• British Government and British Government Guaranteed Securities

• Other investments

(d) Gain or loss on the realisation of investment

(e) Other income

2.  Expenditure U.K.

(a) Sickness benefits

(b) Endowments on maturity

(c) Death benefits

(d) Other benefits (to be specified)

(e) Divided among the members

(f) Deducted for expenses of management

(i) Salaries

(ii) Audit fees

(iii) Valuation Expenses

(iv) Other expenses

(g) Other expenditure

(h) Corporation Tax

3.  Excess of income over expenditure U.K.

PART II U.K. FORMAT OF NON-DIRECTIVE SOCIETY BALANCE SHEET

Commencement Information

I91 Sch. 7 Pt. II in force at 1.9.1994, see reg. 1

Assets U.K.

A. U.K. Investments

I.  Land and buildings U.K.

II.  Mortgages on Land and Buildings U.K.

III.  British Government and British Government Guaranteed Securities U.K.

IV.  Other investments U.K.

B. U.K. Debtors

C. U.K. Other assets

I.  Tangible assets U.K.

II.  Cash at bank and in hand U.K.

III.  Other prepayments and accrued income U.K.

Liabilities U.K.

A. U.K. Benefit and Benefit Reserves Funds

I.  Sickness U.K.

II.  Death U.K.

III.  Members' fund U.K.

IV.  Other Benefit and Benefit Reserves Funds U.K.

V.  Management Fund U.K.

B. U.K. Corporation tax provisions

C. U.K. Creditors

I.  Other creditors including taxation and social security U.K.

II.  Accruals and deferred income U.K.

Regulation 8

PART III U.K. NOTES TO ANNUAL ACCOUNTS OF NON-DIRECTIVE SOCIETY

Commencement Information

I92 Sch. 7 Pt. III in force at 1.9.1994, see reg. 1

The following paragraphs of Schedule 4 (Notes to annual accounts) are specified as the material to be included in the notes to annual accounts of non-directive societies:

(a) paragraph 1 (accounting policies);

F34 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) paragraph 18 (investments);

(d) paragraph 19 (reserves and provisions);

(e) paragraph 22 (guarantees and other financial commitments);

(f) paragraph 29 (commissions);

F34 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) paragraph 32 (industrial assurance).

Textual Amendments

F34 Sch. 7 Pt. 3 paras. (b), (g) omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), reg. 1(2), Sch. para. 3

Regulation 12

SCHEDULE 8 U.K. COMMITTEE OF MANAGEMENT'S ANNUAL REPORT

PART I U.K. SOCIETY

1.  There must be stated names of the persons who, at any time during the financial year, were members of the committee of management of the society. There must be stated the name of the person or persons who at any time during the year held the position of chief executive of the society. U.K.

Commencement Information

I93 Sch. 8 para. 1 in force at 1.9.1994, see reg. 1

2.  The committee of management’s annual report must contain: U.K.

(a) a statement of the business objectives and activities of the society and its jointly controlled bodies and subsidiaries;

(b) particulars of any events which have occurred since the end of the financial year and which are considered by the committee of management of the society to have an important effect on the society or any of its associated bodies, and

(c) an indication of the opinion of the committee of management of the society as to the developments which they consider likely to happen in the business of the society and its associated bodies.

Commencement Information

I94 Sch. 8 para. 2 in force at 1.9.1994, see reg. 1

3.—(1) If significant changes in the fixed assets of the society or of any jointly controlled bodies or subsidiaries have occurred in the financial year, the annual report must contain particulars of the changes. U.K.

(2) If, in the case of such of those fixed assets as consists in interests in land and buildings, their market value (as at the end of the financial year) differs substantially from the amount at which they are included in the balance sheet, and the difference is, in the opinion of the committee of management of such significance as to require that the attention of the members of the society should be drawn to it, the annual report must indicate the difference with such degree of precision as is practicable.

Commencement Information

I95 Sch. 8 para. 3 in force at 1.9.1994, see reg. 1

4.—(1) Subject to subparagraphs (2) and (3), the committee of management annual report must state the following, with respect to each person who, at the end of the financial year, was member of the committee management of the society: U.K.

(a) whether or not he was at the end of that year interested in shares in, or debentures of, any jointly controlled body or subsidiary of the society;

(b) if he was so interested:

(i) the number and amount of shares in, and debentures of, each such body (specifying it) in which he was then interested;

(ii) whether or not he was, at the beginning of that year (or, if he was not then a member of the committee management, when he became one), interested in shares in, or debentures of, that or any other such body; and

(iii) if he was, the number and amount of shares in, and debentures of, each body (specifying it) in which he was interested at the beginning of the financial year or (as the case may be) when he became a member of the committee of management.

(2) The particulars required by subparagraph (1) may be given by way of notes to the society’s annual accounts in respect of the financial year, instead of being stated in the committee of management’s annual report.

(3) Particulars required by subparagraph (1) are not required to be given in respect of committee members' nominee shareholdings, held on behalf of the society.

(4) Any changes in the details disclosed under subparagraph (1) between the end of the year and the relevant date must be disclosed in the committee of management’s annual report and any such change after that date may be so disclosed.

(5) For the purposes of subparagraph (4) “the relevant date” is:

(a) the date one month prior to the date of the notice of the society’s annual general meeting; or

(b) if earlier, the date on which approval, under section 76 of the Act of components of the annual accounts is completed.

Commencement Information

I96 Sch. 8 para. 4 in force at 1.9.1994, see reg. 1

5.—(1) This paragraph applies to the committee of management’s annual report where the average number of persons employed by the society in each month during the financial year exceeded 250. U.K.

(2) For the purposes of subparagraph (1) the average number is the quotient derived by dividing, by the number of complete months in the financial year, the number derived by ascertaining, in relation to each of those months, the number of persons who, under contracts of service, were employed in the month (whether throughout it or not) by the society, and adding up the numbers ascertained.

(3) The committee of management’s annual report must where this paragraph applies contain a statement describing such policy as the society has applied during the financial year:

(a) for giving full and fair consideration to applications for employment by the society made by disabled persons, having regard to their particular aptitudes and abilities;

(b) for continuing the employment of, and for arranging appropriate training for, employees of the society who have become disabled persons during the period when they were employed by the society; and

(c) otherwise for the training, career development and promotion of disabled persons employed by the society.

(4) The committee of management’s annual report must where this paragraph applies also contain a statement describing the action that has been taken during the financial year to introduce, maintain or develop requirements aimed at:

(a) providing staff systematically with information on matters of concern to them as staff;

(b) consulting staff, or their representatives on a regular basis so that the views of staff can be taken into account in making decisions which are likely to effect their interests;

(c) encouraging the involvement of staff in the society’s performance; and

(d) achieving a common awareness on the part of all staff of the financial and economic factors effecting the performance of the society.

(5) In this paragraph:

(a) “employment” means employment other than employment to work wholly or mainly outside the United Kingdom, and “employed” and “staff” must be construed accordingly; and

(b) “disabled person” means the same as in the Disabled Persons (Employment) Act 1944(3) and the Disabled Persons (Employment) Act (Northern Ireland) 1945(4).

Commencement Information

I97 Sch. 8 para. 5 in force at 1.9.1994, see reg. 1

6.—(1) If at the end of the financial year the society has jointly controlled bodies or subsidiaries, there must be contained in the committee of management’s annual report a statement of: U.K.

(a) the average number of persons employed between them in each week in that year by the society and the jointly controlled bodies or subsidiaries; and

(b) the aggregate remuneration paid or payable in respect of that year to the persons by reference to whom the number stated under sub-paragraph (a) is ascertained.

(2) The number to be stated under that sub-paragraph is the quotient derived by dividing, by the number of weeks in the financial year, the number derived by ascertaining, in relation to each of those weeks, the number of persons who, under contracts of service, were employed between them in the week (whether throughout it or not) by the society and its jointly controlled bodies or subsidiaries and adding up the numbers ascertained.

Commencement Information

I98 Sch. 8 para. 6 in force at 1.9.1994, see reg. 1

7.  The remuneration to be taken into account under paragraph 6(1)(b) is the gross remuneration paid or payable in respect of the financial year; and for this purpose “remuneration” includes bonuses (whether payable under contract or not). U.K.

Commencement Information

I99 Sch. 8 para. 7 in force at 1.9.1994, see reg. 1

8.  There must be contained in the committee of management’s annual report a statement confirming that the society had, at the financial year end, the required margin of solvency as prescribed in Regulations made under section 48(2) of the Act for each class of relevant business. U.K.

Commencement Information

I100 Sch. 8 para. 8 in force at 1.9.1994, see reg. 1

9.  There must be stated in the committee of management’s annual report details of any transfers of engagement accepted by the society during the year and the effect, if considered material, on other information provided in the report. U.K.

Commencement Information

I101 Sch. 8 para. 9 in force at 1.9.1994, see reg. 1

10.—(1) The following applies if the society or any subsidiary or jointly controlled body of the society has in the financial year given money for political purposes or charitable purposes or both. U.K.

(2) If the money given exceeded £200 in amount, there must be contained in the committee of management’s annual report for the year:

(a) in the case of each of the purposes for which the money has been given, a statement of the amount of money given for that purpose; and

(b) in the case of political purposes for which money has been given, the following particulars (so far as is applicable):

(i) the name of each person to whom money has been given for those purposes exceeding £200 in amount and the amount of money given; and

(ii) if money exceeding £200 in amount has been given by way of donation or subscription to a political party, the identity of the party and the amount of money given.

(3) For the purposes of this paragraph a society or a subsidiary or jointly controlled body is to be treated as giving money for political purposes if, directly or indirectly:

(a) it gives a donation or subscription to a political party of the United Kingdom or any part of it; or

(b) it gives a donation or subscription to a person who, to the society’s knowledge (or, as the case may be, that of the subsidiary undertaking), is carrying on, or proposing to carry on, any activities which can, at the time at which the donation or subscription was given, reasonably be regarded as likely to affect public support for such a political party as is mentioned.

(4) For the purposes of this paragraph money given for charitable purposes to a person who, when it was given, was ordinarily resident outside the United Kingdom shall be left out of account.

(5) In this paragraph, “charitable purposes” means purposes which are exclusively charitable; and, as respects Scotland, “charitable” is to be construed as if it were contained in the Income Tax Acts.

Commencement Information

I102 Sch. 8 para. 10 in force at 1.9.1994, see reg. 1

11.  The committee of management’s annual report must contain particulars of any other matters so far as they are material for the appreciation of the state of the society’s affairs by its members, being matters the disclosure of which will not, in the opinion of the committee of management, be harmful to the business of the society or of any of its jointly controlled bodies or subsidiaries. U.K.

Commencement Information

I103 Sch. 8 para. 11 in force at 1.9.1994, see reg. 1

PART II U.K. NON-DIRECTIVE SOCIETY

12.  The following paragraphs of Part I of this Schedule are specified as the material to be included in the committee of management’s annual report of a non-directive society: U.K.

(a) paragraph 1 (names of the members of the committee of management);

(b) paragraph 2a (a fair view of the activities of the society);

(c) paragraph 8 (solvency);

(d) paragraph 10 (general matters); and

(e) paragraph 11 (other material matters).

Commencement Information

I104 Sch. 8 para. 12 in force at 1.9.1994, see reg. 1

Regulation 14

SCHEDULE 9 U.K. INTERPRETATION OF SCHEDULES

1.  The following paragraphs apply for the purposes of the interpretation of the Schedules to these Regulations. U.K.

Commencement Information

I105 Sch. 9 para. 1 in force at 1.9.1994, see reg. 1

Balance sheet date U.K.

2.  “Balance sheet date”, in relation to a balance sheet, means the date as at which the balance sheet was prepared.

Commencement Information

I106 Sch. 9 para. 2 in force at 1.9.1994, see reg. 1

Leases U.K.

3.  In respect of leases:

“long lease” means a lease in the case of which the portion of the term for which it was granted remaining unexpired at the end of the financial year is not less than 50 years,

“short lease” means a lease which is not a long lease, and

“lease” includes an agreement for a lease.

Commencement Information

I107 Sch. 9 para. 3 in force at 1.9.1994, see reg. 1

Listed investments U.K.

4.  “Listed investment” means an investment listed on a recognised stock exchange or on any stock exchange of repute outside the United Kingdom and the expression “unlisted investment” is to be construed accordingly.

Commencement Information

I108 Sch. 9 para. 4 in force at 1.9.1994, see reg. 1

Loans U.K.

5.  A loan is treated as falling due for repayment, and an instalment of a loan is treated as falling due for payment, on the earliest date on which the lender could require repayment or (as the case may be) payment, if he exercised all options and rights available to him.

Commencement Information

I109 Sch. 9 para. 5 in force at 1.9.1994, see reg. 1

Materiality U.K.

6.  No provision of these Regulations requiring the inclusion of amounts in a particular account, or in notes to the annual accounts F35 ..., are to be taken to prohibit the disregarding of an amount which, in the particular context of that provision is immaterial.

Textual Amendments

F35 Words in Sch. 9 para. 6 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), reg. 1(2), Sch. para. 4(a)

Commencement Information

I110 Sch. 9 para. 6 in force at 1.9.1994, see reg. 1

Provisions U.K.

7.—(1) References to provisions for depreciation or diminution in value of assets are to be taken as references to any amount written off by way of providing for depreciation or diminution in value of assets.

(2) Any reference in an income and expenditure account to the depreciation of, or amounts written off, assets of any description is to be taken as a reference to any provision for depreciation or diminution in value of assets of that description.

(3) References to provisions for liabilities F36 ... (other than in paragraphs 33 to 40 of Schedule 6) are to be taken as a reference to any amount retained as reasonably necessary for the purpose of providing for any liability [F37 the nature of which is clearly defined and] which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

Textual Amendments

F36 Words in Sch. 9 para. 7(3) omitted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 6(2)(a)

F37 Words in Sch. 9 para. 7(3) substituted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 6(2)(b)

Commencement Information

I111 Sch. 9 para. 7 in force at 1.9.1994, see reg. 1

Scots land tenure U.K.

8.  In the application of these Regulations in Scotland, “land of freehold tenure” means land in respect of which the society is the proprietor of the dominium utile or, in the case of land not held on feudal tenure, is the owner, and “land of leasehold tenure” means land of which the society (or, as the case may be, a relevant subsidiary) is the tenant under a lease.

Commencement Information

I112 Sch. 9 para. 8 in force at 1.9.1994, see reg. 1

Staff costs U.K.

F38 9.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F38 Sch. 9 para. 9 omitted (29.6.2008 with effect in relation to financial years beginning on or after that date) by virtue of The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2008 (S.I. 2008/1144), reg. 1(2), Sch. para. 4(b)

Other definitions U.K.

10.—(1) In the Schedules to these Regulations:

[F39 “fair value reserve” has the meaning given by paragraph 24D of Schedule 6;]

“fungible assets” means assets of any description which are substantially indistinguishable one from another; and

“provision for unexpired risks” means the amount set aside in addition to unearned premiums in respect of risks to be borne by the society after the end of the financial year, in order to provide for all claims and expenses in connection with insurance contracts in force in excess of the related unearned premiums and any premiums receivable on those contracts.

Textual Amendments

F39 Words in Sch. 9 para. 10 inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 6(3)

Commencement Information

I113 Sch. 9 para. 10 in force at 1.9.1994, see reg. 1

[F40 Financial instruments U.K.

11.   References to “derivative financial instruments” are deemed to include commodity-based contracts that give either contracting party the right to settle in cash or some other financial instrument, except when such contracts –

(a) were entered into in order to meet the society’s expected purchase, sale or usage requirements and continue to meet those requirements;

(b) were designated for such purpose at their inception; and

(c) are expected to be settled by delivery of the commodity.]

Textual Amendments

F40 Sch. 9 paras. 11,12 inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 6(4)

[F40 Further Expressions U.K.

12.— (1) The expressions listed in sub-paragraph (2) have the same meaning as they have in Council Directive 78/660/EEC , and for the purposes of those expressions, it shall be assumed that a society is subject to the provisions of that Directive.

(2) “Available-for-sale financial asset”, “business combination”, “cash flow risk”, “commodity-based contracts”, “credit risk”, “equity instrument”, “exchange difference”, “fair value hedge accounting system”, “financial fixed asset”, “financial instrument”, “foreign entity”, “hedge accounting”, “hedge accounting system”, “hedged items”, “hedging instrument”, “held to maturity”, “held for trading purposes”, “liquidity risk”, “monetary item”, “price risk”, “receivables”, “reliable market” and “trading portfolio”.]

Textual Amendments

F40 Sch. 9 paras. 11,12 inserted (1.10.2005 with effect as respects financial years which begin on or after 1.1.2005 and end on or after October 2005) by The Friendly Societies (Accounts and Related Provisions) (Amendment) Regulations 2005 (S.I. 2005/2210), regs. 1(2), 6(4)

Explanatory Note

(This note is not part of the Regulations)

These Regulations prescribe the format and content of the annual accounts and committee of management report which must be prepared in respect of friendly societies or of friendly societies and their subsidiaries and jointly controlled bodies as a whole. In respect of societies to which the Insurance Directives apply, these Regulations also implement Council Directive 91/674 on the annual accounts and consolidated accounts of insurance undertakings. The requirements of the Directive are imposed on friendly societies whose contribution income exceeds the thresholds set out in section 37 of the Act, on all incorporated societies and on societies which conduct reinsurance business.

Regulation 2 defines terms for the purposes of these Regulations. In particular the definition of “society” should be noted as it has a restricted meaning for the purposes of these Regulations. Under regulation 3 the Regulations apply to accounts and reports for the 1995 financial year and thereafter.

Regulation 4 provides for the format of income and expenditure accounts and balance sheets of societies which do not have subsidiaries or jointly controlled bodies. Regulation 5 provides for the format of income and expenditure accounts and balance sheets of societies which have subsidiaries or jointly controlled bodies.

Regulation 6 prescribes requirements for the content and form of the accounts including requiring the accounts to be prepared in accordance with notes set out in the Schedules to the Regulations. Regulation 7 prescribes further requirements for group accounts. Regulation 8 requires the inclusion of notes to the accounts containing the material specified in Schedule 4 to the Regulations. Regulation 9 introduces Schedule 5 which sets out the information on investments in associated bodies which must be included in the notes. Regulation 10 introduces Schedule 6 which sets out the accounting principles and rules which must be applied in preparing the accounts.

Regulation 11 and Schedule 7 prescribe the accounts requirements for societies to which the Insurance Directives do not apply and which are not incorporated. Simplified income and expenditure accounts, balance sheets and notes thereto are required.

Regulation 12 and Schedule 8 set out the requirements for the committee of management’s annual report. Less stringent requirements are specified for societies to which the Insurance Directives do not apply or which are not incorporated.

Regulation 13 contains transitional provisions concerning accounting records for the year preceding the year to which these Regulations first apply. Regulation 14 introduces Schedule 9 which contains definitions of certain terms for the purposes of the Schedules to these Regulations.

A review of the cost of compliance with these Regulations has been undertaken and the resulting compliance cost assessment may be purchased from the Secretary, Friendly Societies Commission, 15 Great Marlborough Street, London W1V 2AX.

(1)

1992 c. 40.

(2)

S.I. 1994 No. 1982.

(3)

1944 c. 10.

(4)

1945 c. 6. (N.I.).