Changes to Accounting and Auditing Requirements for Limited Liability Partnerships (LLPs).
Recent changes to the accounting and auditing requirements in the Companies Act 1985 will affect Limited Liability Partnerships (LLP’s) from financial years beginning on or after 1 January 2005. This is a summary of those changes:
All LLP’s will have the option of preparing their individual accounts using International Accounting Standards (IAS) rather than UK GAAP, and will also have the option of preparing their consolidated accounts using IAS.
GAAP stands for Generally Accepted Accounting Principles. It is a common set of accounting principles, standards and procedures specific to one country (eg UK GAAP, US GAAP etc). GAAP is a combination of authoritative standards (set by policy boards) and the accepted methods of doing accounting. For example, the standards of UK GAAP are set by the Financial Accounting Standards Board. The Generally Accepted Accounting Principles in the UK, or UK GAAP, are the overall body of regulation establishing how company accounts must be prepared in the United Kingdom. This includes not only accounting standards, but also UK company law.
LLP’s that continue to prepare their accounts using UK GAAP will have a new accounting option to use fair value accounting for financial instruments, investment property and/or living plants and animals.
For LLP’s that continue to prepare their accounts using UK GAAP there are changes to the requirements in the following areas:
- How items must be presented in the balance sheet and profit and loss account;
- Disclosure of information on derivatives.
For LLP’s that have overseas interests, the current automatic three-month extension under section 244 of the Companies Act 1985 for laying and delivering accounts is repealed.
For parent LLP’s, there are changes to the requirements and options on consolidation.
For LLP’s that have their accounts audited, there are new requirements concerning the audit report.
A number of amendments have also been made in line with the package of reforms to corporate insolvency introduced by the Enterprise Act 2002. These are aimed at encouraging the rescue of viable businesses that get into financial difficulty.
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