SCHEDULE 1 NON-IAS INDIVIDUAL ACCOUNTS

PART 2 ACCOUNTING PRINCIPLES AND RULES

SECTION A ACCOUNTING PRINCIPLES

10 Preliminary
(1) The amounts to be included in respect of all items shown in an LLP’s accounts must be determined in accordance with the principles set out in this Section.
(2) But if it appears to the members of the LLP that there are special reasons for departing from any of those principles in preparing the LLP’s accounts in respect of any financial year they may do so, in which case particulars of the departure, the reasons for it and its effect must be given in a note to the accounts.

Accounting principles
11 The LLP is presumed to be carrying on business as a going concern.
12 Accounting policies must be applied consistently within the same accounts and from one financial year to the next.
13 The amount of any item must be determined on a prudent basis, and in particular—
(a) only profits realised at the balance sheet date must be included in the profit and loss account, and
(b) all liabilities which have arisen 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 members in accordance with section 414 of the 2006 Act (approval and signing of accounts).
14 All 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.
15 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.

SECTION B HISTORICAL COST ACCOUNTING RULES

16 Preliminary
Subject to Sections C and D of this Part of this Schedule, the amounts to be included in respect of all items shown in an LLP’s accounts must be determined in accordance with the rules set out in this Section.

Fixed assets

17 General rules
(1) The amount to be included in respect of any fixed asset must be its purchase price or production cost.
(2) This is subject to any provision for depreciation or diminution in value made in accordance with paragraphs 18 to 20.

Rules for depreciation and diminution in value
18 In the case of any fixed asset which has a limited useful economic life, the amount of—
(a) its purchase price or production 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 purchase price or production 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.
19 (1) Where a fixed asset investment of a description falling to be included under item A.III of either of the balance sheet formats set out in Part 1 of this Schedule 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.
(2) Provisions for diminution in value must be made in respect of any fixed asset which has diminished in value if the reduction in its value is expected to be permanent (whether its useful economic life is limited or not), and the amount to be included in respect of it must be reduced accordingly.
(3) Any provisions made under sub-paragraph (1) or (2) which are not shown in the profit and loss account must be disclosed (either separately or in aggregate) in a note to the accounts.
20 (1) Where the reasons for which any provision was made in accordance with paragraph 19 have ceased to apply to any extent, that provision must be written back to the extent that it is no longer necessary.
(2) Any amounts written back in accordance with sub-paragraph (1) which are not shown in the profit and loss account must be disclosed (either separately or in aggregate) in a note to the accounts.

21 Development costs
(1) Notwithstanding that an item in respect of “development costs” is included under “fixed assets” in the balance sheet formats set out in Part 1 of this Schedule, an amount may only be included in an LLP’s balance sheet in respect of development costs in special circumstances.
(2) If any amount is included in an LLP’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.

22 Goodwill
(1) The application of paragraphs 17 to 20 in relation to goodwill (in any case where goodwill is treated as an asset) is subject to the following.
(2) Subject to sub-paragraph (3), the amount of the consideration for any goodwill acquired by an LLP must be reduced by provisions for depreciation calculated to write off that amount systematically over a period chosen by the members of the LLP.
(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 an LLP is shown or included as an asset in the LLP’s balance sheet there must be disclosed in a note to the accounts—
(a) the period chosen for writing off the consideration for that goodwill, and
(b) the reasons for choosing that period.

Current assets
23 Subject to paragraph 24, the amount to be included in respect of any current asset must be its purchase price or production cost.
24 (1) If the net realisable value of any current asset is lower than its purchase price or production cost, the amount to be included in respect of that asset must be the net realisable value.
(2) Where the reasons for which any provision for diminution in value was made in accordance with sub-paragraph (1) have ceased to apply to any extent, that provision must be written back to the extent that it is no longer necessary.

Miscellaneous and supplementary provisions

25 Excess of money owed over value received as an asset item
(1) Where the amount repayable on any debt owed by an LLP 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 repayment of the debt, and
(b) if the current amount is not shown as a separate item in the LLP’s balance sheet, it must be disclosed in a note to the accounts.

26 Assets included at a fixed amount
(1) Subject to sub-paragraph (2), assets which fall to be included—
(a) amongst the fixed assets of an LLP under the item “tangible assets”, or
(b) amongst the current assets of an LLP under the item “raw materials and consumables”,
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 LLP’s state of affairs, and
(b) their quantity, value and composition are not subject to material variation.

Determination of purchase price or production cost
27 (1) The purchase price of an asset is to be determined by adding to the actual price paid any expenses incidental to its acquisition.
(2) The production cost of an asset is to be determined by adding to the purchase price of the raw materials and consumables used the amount of the costs incurred by the LLP which are directly attributable to the production of that asset.
(3) In addition, there may be included in the production cost of an asset—
(a) a reasonable proportion of the costs incurred by the LLP which are only indirectly attributable to the production of that asset, but only to the extent that they relate to the period of production, and
(b) interest on capital borrowed to finance the production of that asset, to the extent that it accrues in respect of the period of production,
provided, however, in a case within paragraph (b), that the inclusion of the interest in determining the cost of that asset and the amount of the interest so included is disclosed in a note to the accounts.
(4) In the case of current assets distribution costs may not be included in production costs.
28 (1) The purchase price or production cost of—
(a) any assets which fall to be included under any item shown in an LLP’s balance sheet under the general item “stocks”, and
(b) any assets which are fungible assets (including investments),
may be determined by the application of any of the methods mentioned in sub-paragraph (2) in relation to any such assets of the same class, provided that the method chosen is one which appears to the members to be appropriate in the circumstances of the LLP.
(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) For the purposes of this paragraph, assets of any description must be regarded as fungible if assets of that description are substantially indistinguishable one from another.

29 Substitution of original stated amount where price or cost unknown
(1) This paragraph applies where—
(a) there is no record of the purchase price or production cost of any asset of an LLP or of any price, expenses or costs relevant for determining its purchase price or production cost in accordance with paragraph 27, or
(b) any such record cannot be obtained without unreasonable expense or delay.
(2) In such a case, the purchase price or production cost of the asset must be taken, for the purposes of paragraphs 17 to 24, to be the value ascribed to it in the earliest available record of its value made on or after its acquisition or production by the LLP.

SECTION C ALTERNATIVE ACCOUNTING RULES

Preliminary
30 (1) The rules set out in Section B are referred to below in this Schedule as the historical cost accounting rules.
(2) Those rules, with the omission of paragraphs 16, 22 and 26 to 29, are referred to below in this Part of this Schedule as the depreciation rules; and references below in this Schedule to the historical cost accounting rules do not include the depreciation rules as they apply by virtue of paragraph 33.
31 Subject to paragraphs 33 to 35, the amounts to be included in respect of assets of any description mentioned in paragraph 32 may be determined on any basis so mentioned.

32 Alternative accounting rules
(1) Intangible fixed assets, other than goodwill, may be included at their current cost.
(2) Tangible fixed assets may be included at a market value determined as at the date of their last valuation or at their current cost.
(3) Investments of any description falling to be included under item A III of either of the balance sheet formats set out Part 1 of this Schedule may be included either—
(a) at a market value determined as at the date of their last valuation, or
(b) at a value determined on any basis which appears to the members to be appropriate in the circumstances of the LLP.
But in the latter case particulars of the method of valuation adopted and of the reasons for adopting it must be disclosed in a note to the accounts.
(4) Investments of any description falling to be included under item B III of either of the balance sheet formats set out in Part 1 of this Schedule may be included at their current cost.
(5) Stocks may be included at their current cost.

33 Application of the depreciation rules
(1) Where the value of any asset of an LLP is determined on any basis mentioned in paragraph 32, that 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 LLP’s accounts, instead of its purchase price or production cost or any value previously so determined for that asset.
The depreciation rules apply accordingly in relation to any such asset with the substitution for any reference to its purchase price or production cost of a reference to the value most recently determined for that asset on any basis mentioned in paragraph 32.
(2) The amount of any provision for depreciation required in the case of any fixed asset by paragraphs 18 to 20 as they apply 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 any of those paragraphs in the case of that asset according to the historical cost accounting rules is referred to as the historical cost amount.
(3) Where sub-paragraph (1) applies in the case of any fixed asset the amount of any provision for depreciation in respect of that asset—
(a) included in any item shown in the profit and loss account in respect of amounts written off assets of the description in question, or
(b) taken into account in stating any item so shown which is required by note (9) of the notes on the profit and loss account formats set out in Part 1 of this Schedule to be stated after taking into account any necessary provision for depreciation or diminution in value of assets included under it,
may be the historical cost amount instead of the adjusted amount, provided that the amount of any difference between the two is shown separately in the profit and loss account or in a note to the accounts.

34 Additional information to be provided in case of departure from historical cost accounting rules
(1) This paragraph applies where the amounts to be included in respect of assets covered by any items shown in an LLP’s accounts have been determined on any basis mentioned in paragraph 32.
(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) In the case of each balance sheet item affected (except stocks) either—
(a) the comparable amounts determined according to the historical cost accounting rules, or
(b) the differences between those amounts and the corresponding amounts actually shown in the balance sheet in respect of that item,
must be shown separately in the balance sheet or in a note to the accounts.
(4) In sub-paragraph (3), references in relation to any item to the comparable amounts determined as there mentioned are references to—
(a) the aggregate amount which would be required to be shown in respect of that item if the amounts to be included in respect of all the assets covered by that item were determined according to the historical cost accounting rules, and
(b) the aggregate amount of the cumulative provisions for depreciation or diminution in value which would be permitted or required in determining those amounts according to those rules.

35 Revaluation reserve
(1) With respect to any determination of the value of an asset of an LLP on any basis mentioned in paragraph 32, the amount of any profit or loss arising from that determination (after allowing, where appropriate, for any provisions for depreciation or diminution in value made otherwise than by reference to the value so determined and any adjustments of any such provisions made in the light of that determination) 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 LLP’s balance sheet under a separate sub-heading in the position given for the item “revaluation reserve” in Format 1 or 2 of the balance sheet formats set out in Part 1 of this Schedule, but need not be shown under that name.
(3) The treatment for taxation purposes of amounts credited or debited to the revaluation reserve must be disclosed in a note to the accounts.

SECTION D FAIR VALUE ACCOUNTING

36 Inclusion of financial instruments at fair value
(1) Subject to sub-paragraphs (2) to (5), financial instruments (including derivatives) may be included at fair value.
(2) Sub-paragraph (1) does not apply to financial instruments that constitute liabilities unless—
(a) they are held as part of a trading portfolio,
(b) they are derivatives, or
(c) they are financial instruments falling within sub-paragraph (4).
(3) Unless they are financial instruments falling within sub-paragraph (4), sub-paragraph (1) does not apply to—
(a) financial instruments (other than derivatives) held to maturity,
(b) loans and receivables originated by the LLP and not held for trading purposes,
(c) interests in subsidiary undertakings, associated undertakings and joint ventures,
(d) equity instruments issued by the LLP,
(e) contracts for contingent consideration in a business combination, or
(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.
(4) Financial instruments that, under international accounting standards adopted by the European Commission on or before 5th September 2006 in accordance with the IAS Regulation, may be included in accounts at fair value, may be so included, provided that the disclosures required by such accounting standards are made.
(5) If the fair value of a financial instrument cannot be determined reliably in accordance with paragraph 37, sub-paragraph (1) does not apply to that financial instrument.
(6) In this paragraph—
“associated undertaking” has the meaning given by paragraph 19 of Schedule 4 to these Regulations;
“joint venture” has the meaning given by paragraph 18 of that Schedule.

37 Determination of fair value
(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 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 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.

38 Hedged items
An LLP may include any assets and liabilities, or identified portions of such assets or liabilities, that qualify as hedged items under a fair value hedge accounting system at the amount required under that system.

39 Other assets that may be included at fair value
(1) This paragraph applies to—
(a) investment property, and
(b) living animals and plants,
that, under international accounting standards, may be included in accounts at fair value.
(2) Such investment property and such living animals and plants may be included at fair value, provided that all such investment property or, as the case may be, all such living animals and plants are so included where their fair value can reliably be determined.
(3) In this paragraph, “fair value” means fair value determined in accordance with relevant international accounting standards.

40 Accounting for changes in value
(1) This paragraph applies where a financial instrument is valued in accordance with paragraph 36 or 38 or an asset is valued in accordance with paragraph 39.
(2) Notwithstanding paragraph 13 in this Part of this Schedule, and subject to sub-paragraphs (3) and (4), a change in the value of the financial instrument or of the investment property or living animal or plant must be included in the profit and loss 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 profit and loss account, or
(b) the change in value relates to an exchange difference arising on a monetary item that forms part of an LLP’s net investment in a foreign entity,
the amount of the change in value must 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,
the change in value may be credited to or (as the case may be) debited from the fair value reserve.

41 The fair value reserve
(1) The fair value reserve must be adjusted to the extent that the amounts shown in it are no longer necessary for the purposes of paragraph 40(3) or (4).
(2) The treatment for taxation purposes of amounts credited or debited to the fair value reserve must be disclosed in a note to the accounts.