The Consultative Committee of Accountancy Bodies (CCAB) is consulting on proposals to revise the statement of recommended practice (SORP) for accounting by limited liability partnerships (LLPs) to reflect changes made by the Financial Reporting (FRC) to UK accounting standards in July 2015 and changes in LLP regulations
Amendments were made to the LLP regulations in May 2016 to introduce changes to the financial reporting framework for LLPs similar to those that have been recently been introduced for companies, including raising the size thresholds which determine when an LLP or group qualifies as small and the creation of a new micro-entities regime for very small LLPs. These changes are effective for financial years beginning on or after 1 January 2016.
The FRC’s amendments resulted in the withdrawal of the Financial Reporting Standard for Smaller Entities (FRSSE); amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland to add a new section outlining presentation and disclosure requirements for small entities; and the publication of FRS 105 The Financial Reporting Standard applicable to the Microentities Regime, a new standard available to entities choosing to apply the micro-entities regime.
CCAB says that while these changes do not fundamentally alter the financial reporting regime for LLPs, they allow LLPs – particularly small LLPs – to benefit from a less burdensome financial reporting regime and ensure that the legislative requirements for LLPs are aligned with those for limited companies.
The draft SORP has been updated to reflect the new LLP regulations and the changes to UK accounting standards. Other minor clarifications have also been proposed where appropriate.
Andrew Vials, chairman of the CCAB SORP LLPs steering group, said: ‘The SORP has long established accounting practices for LLPs and ensures accountability and comparability. It now needs updating to bring it into line with recent changes to the LLP regulations and UK accounting standards.
‘While the proposed revisions are unlikely to affect existing practice for larger LLPs, they will have a potentially significant impact on small and micro- LLPs. We therefore encourage constituents to consider the exposure draft carefully and look forward to hearing their views on it.’
The final SORP will be effective for accounting periods beginning on or after 1 January 2016. However, earlier adoption will be permitted for accounting periods beginning on or after 1 January 2015 provided that the LLP regulations are applied from the same date.
The deadline for comments on the exposure draft is 1 November.
Details of the draft SORP Accounting by Limited Liability Partnerships are here.
