Statement of Recommended Practice Accounting …

1 CCAB Ltd Registered office at above address. Registered in England of Recommended PracticeAccounting by Limited Liability PartnershipsEffective for periods commencing on or after 1 January 201031 March 2010PO Box 433 Chartered Accountants HallMoorgate Place, London EC2P 2 BJTelephone:020 7920 8100 Facsimile:020 7628 1874 Email: Institute of Chartered Accountants in England and WalesThe Institute of Chartered Accountants of ScotlandThe Institute of Chartered Accountants in IrelandThe Association of Chartered Certified AccountantsThe Chartered Institute of Management AccountantsThe Chartered Institute of Public Finance and Accountancy1 Statement OF Recommended PRACTICEACCOUNTINGBY LIMITED LIABILITY PARTNERSHIPSCONTENTSP aragraphPrefaceBackground to the SORPCCAB SteeringGroupand Working PartyReviewof the SORPF uture editions of the SORPNote on legal issuesStatement by the Accounting Standards BoardIntroductionAccounting requirements1 Scope and objectives2-3 Measurement4-5 Format and terminology6-7 Definitions8-24 The contents of the Annual Report and financial statements25-31 The application of Generally Accepted

2 Accounting Practice toLimited Liability PartnershipsMembers remuneration and interests32-74 Retirement benefits75-94 Taxation95-99 Revenue recognition:stocks and long-term contracts100-101 Business combinations and group accounts102-119 Provisions and other implications of FRS 12120-127 Related parties128-131 Compliance statement132 Effective date133-134 Appendix 1: Examples showingthe presentation of members interests afterapplicationof FRS 25 and UITF 39 Appendix 2 :Liability and equity elements of members interestsAppendix3: Flowchartsfor analysing puttableinstrumentsfor LLPsAppendix4:Merger Accounting on initial transition of an existing undertakingAppendix5: Legal opinionAppendix6: Basis for conclusions2 This Statement of Recommended Practicedoes not purport to deal with all possiblequestions and issues that may arise in any given situation.

3 The Consultative Committeeof Accountancy Bodiesand theauthors do not accept responsibility for loss caused toany person who acts or refrains from acting in reliance on the material in thispublication, whether such loss is caused by negligence or otherwise. The Consultative Committee of Accountancy Bodies 2010 All rights document may be reproducedwithout specific permission, in whole or part, free ofcharge and in any format or medium, subject to the conditions that: it is reproduced accurately and not used in a misleading context; the source of the extract or document, and the copyright of The ConsultativeCommittee of Accountancy Bodies, is acknowledged; and the title of the document is third-party copyright material has been identified application for permissionmust be made to the copyright to the SORPThis Statement of Recommended Practice ( sorp ) is issued by the ConsultativeCommittee of Accountancy Bodies (CCAB), the members of which are.

4 The Institute of Chartered Accountants in England and WalesThe Institute of Chartered Accountants of ScotlandThe Institute of Chartered Accountants in IrelandThe Association of Chartered Certified AccountantsThe Chartered Institute of Management AccountantsThe CharteredInstitute of Public Finance and AccountancyThe Accounting Standards Board (ASB) has approved the CCAB for the purpose ofissuing a recognised sorp for Limited Liability Partnerships (LLPs) incorporated inGreat Britain under the Limited Liability Partnerships Act 2000 ( 2000 Act ).As partof the process for obtaining this approval, the CCAB agrees to follow the ASB s Codeof Practice for bodies recognised for issuing Code of Practice sets outprocedures to be followed in the development of procedures do notinclude a comprehensive review of the proposed sorp by the ASB, but a limitedreview is issued by sorp -making bodies include a Statement by the ASB that:(i)outlines the limited nature of the review thatthe ASB has undertaken.

5 And(ii)confirms that the sorp does not appear to contain any fundamental points ofprinciple that are unacceptable in the context of current Accounting Practice , orto conflict with an Accounting standard or the ASB s plans forfuture ASB Statement is included on page SteeringGroupand Working PartyThe sorp for LLPs differs from a number of other SORPs in that it does not apply to aspecific industry or sector, but to a legal process ofdeveloping and reviewing the sorp is overseen by a Steering of the Steering Group is drawn both from trades and professions that havemember firms that commonly have LLP status, including the accountancy and legalprofessions and the construction industry, and from amongst users of LLP Steering Group deals with strategy and high-level issues, while the Working Partyconcentrates on technical of these two groups at31 March 2010is set out GroupAndrew Vials (Chairman)The Institute of Chartered Accountants in England and WalesJonathan BeckerleggeThe Association of Chartered Certified AccountantsDavid BerraganBarclays plcMatt BlakeHMRCG eorge BullConstruction Industry CouncilIan DinwiddieAllen & OveryLLPS teve GaleThe Institute of Chartered Accountants of ScotlandPeter GrahamThe Law SocietyBarry LawsonBritish Venture Capital AssociationFrances PatersonConstruction Industry CouncilPeter SaundersSORP Working PartyRichard TurnorAssociation of Partnership PractitionersDavid TyrrallDepartment for Business, Innovation and SkillsWorking PartyPeter Saunders(Chairman)

6 DeloitteLLPPhil BardenDeloitte LLPK athryn CearnsHerbert Smith LLPH annah KingPricewaterhouseCoopers LLPY vonne LangSmith & WilliamsonLimitedJanet MartonKPMGLLPD avid SnellPricewaterhouseCoopersLLPR eview of the SORPThe ASB approved the CCAB for the purposes of issuing a sorp on 2 March first edition of the SORPA ccounting by Limited Liability Partnershipswaspublished on 29 May 2002, and the second edition on 31 March keeping withthe ASB s Code of Practice , the CCAB reviewsthe sorp for changes in accountingpractice and new developments, andaccordinglypublished an Exposure Draft of arevised SORPfor public commenton 29 July 2009. As well as requesting comments onall aspects of the Exposure Draft, certain issues on which the CCAB particularly soughtviews were also presented, as discussed in the Basisfor Conclusions in Appendix responses to these questions and regarding other matters were carefully consideredduring the development of the final version of the revised sorp .

7 The ASB approvedthe sorp for publication on 18 March 2010 and the third edition of theSORPA ccounting by Limited Liability Partnershipswas published on31 March 2010 Future editions of the SORPIn keeping with the ASB s Code of Practice , the CCAB will keep the sorp underreview for changes in Accounting Practice and on legal issuesThe sorp discusses a number of legal issues relating to discussion isincluded solely to explain the principles adopted in the sorp and should not be reliedupon for any other BY THE Accounting STANDARDS BOARD ON THE sorp Statement OF Recommended Practice : Accounting BYLIMITED LIABILITY PARTNERSHIPS The aims of the Accounting Standards Board (the ASB) are to establish and improvestandards of financial Accounting and reporting, forthe benefit of users, preparers, andauditors of financial information.

8 To this end, the ASB issues Accounting standards thatare primarily applicable to general purpose company financial statements. In particularindustries or sectors, further guidance may be required in order to implementaccounting standards effectively. This guidance is issued, in the form of Statements ofRecommended Practice (SORPs), by bodies recognised for the purpose by the Consultative Committee of Accountancy Bodies (the CCAB) has confirmed that itshares the ASB s aim of advancing and maintaining standards of financial reporting inthe public interest and has been recognised by the ASB for the purpose of issuingSORPs. As a condition of recognition, the CCAB has agreedto follow the ASB s codeof Practice for bodies recognised for issuing SORPs. The code of Practice sets outprocedures to be followed in the development of SORPs.

9 These procedures do notinclude a comprehensive review of the proposed sorp by the ASB, buta review oflimited scope is the basis of its review, the ASB has concluded that the sorp has been developed inaccordance with the ASB s code of Practice and does not appear to contain anyfundamental points of principle that are unacceptable in the context of currentaccounting Practice or to conflict with an Accounting standard or the ASB s presentplans for future 20106 Statement OF Recommended PRACTICEACCOUNTING BY LIMITED LIABILITY PARTNERSHIPSINTRODUCTIONA ccounting detailed Accounting requirements relating to Limited Liability Partnerships(LLPs) arecurrentlyset out in thefollowing Statutory Instruments: TheLimited Liability Partnerships(Accounts and Audit) (Application ofCompanies Act 2006)Regulations2008(SI 2008/1911); TheSmallLimited Liability Partnerships (Accounts) Regulations 2008(SI2008/1912); and The Large and Medium-sized Limited Liability Partnerships (Accounts)Regulations 2008 (SI 2008/1913).

10 These are collectively referred to in this sorp asthe Regulations .TheRegulations applyto accounts for financial years commencing on or after 1 October 2008, replacing the Accounting provisions previously contained in theLimited Liability Partnerships Regulations 2001 and the Limited LiabilityPartnerships Regulations (Northern Ireland) 2004. The Regulationsapply, withmodifications, the Accounting and auditing provisions of theCompanies Act2006to LLPs. The Regulations apply to the whole of the United Kingdom,reflecting the scope of the Companies Act of StandardAccounting Practice (SSAPs), Financial Reporting Standards (FRSs), UITFA bstracts and other components of UK Generally Accepted AccountingPractice (GAAP) also apply to any financial statements of LLPs intended togive a true and fair view.