December 31



at 1 January 2001)

Reproduced with kind permission from The
Corporate Training Group Limited

SSAP2 Disclosure of accounting policies (see
FRS 18)

Accounting for government grants

Accounting for value added tax

Stocks and long term contracts

Accounting for research and development

Accounting for deferred taxation (see FRS 19)

Accounting for post balance sheet events

Accounting for investment properties

Foreign currency translation

Accounting for leases and hire purchase contracts

Accounting for pension costs (see FRS 17)

Segmental reporting

FRS1 Cash
flow statements

FRS2 Accounting
for subsidiary undertakings

FRS3 Reporting
financial performance

FRS4 Capital

FRS5 Reporting
the substance of transactions

FRS6 Acquisitions
and mergers

FRS7 Fair
values in acquisition accounting

FRS8 Related
party disclosures

FRS9 Associates
and joint ventures

FRS10 Goodwill and intangible assets

FRS 11 Impairment of fixed assets and goodwill

FRS 12 Provisions, contingent liabilities and contingent

FRS 13 Derivatives and other financial instruments: disclosures

FRS 14 Earnings per share

FRS 15 Tangible fixed assets

FRS 16 Current tax

FRS 17 Retirement Benefits

FRS 18 Accounting policies

FRS 19 Deferred tax

SSAP2 Financial
statements are prepared presuming that four fundamental accounting
concepts apply:






Government grants should be recognised in the profit and loss
account to match them with the expenditure towards which they are
intended to contribute.

Government grants which
have been received but not recognised in the profit and loss account
are classified as deferred income in the balance sheet.


Turnover in
the profit and loss account should exclude VAT.


Stocks are included in the balance sheet at the lower of cost
and net realisable value.

Long term contracts
are reflected in the profit and loss account by recording turnover
and related costs as the contract activity progresses. Attributable
profit is only recorded when the outcome of the contract is reasonably


Expenditure on research should be written off as it is incurred.

Expenditure on development
may be written off as incurred or, if certain stringent conditions
are met, capitalised and amortised in line with sale or use of the
product or process.

SSAP15 Deferred
tax should be accounted for on a partial provision basis, using the
liability method.


Amount in financial statements should be adjusted to reflect
material post balance sheet events which provide additional evidence
of conditions existing at the balance sheet date (‘adjusting

Financial statements
should disclose material post balance sheet events which concern
conditions which did not exist at the balance sheet date (‘non
adjusting events’) if they are of such materiality that the
ability of users to understand financial position is affected.

SSAP19 Investment properties
should be included in the balance sheet at open market value. Provision
for depreciation should not be made.


Individual companies should translate transactions denominated
in foreign currencies at the rate prevailing at the date of the transaction.
At year end, monetary assets and liabilities denominated in foreign
currencies should be retranslated to the closing rate.

Financial statements
of foreign enterprises should normally be translated for consolidation
purposes at the closing rate. The profit and loss account may be
translated at either the closing rate or average rate.


At the inception of a finance lease, the amount included in
assets and creditors is the present value of the minimum lease payments
(or fair value, as an approximation).

Finance charges are
allocated to accounting periods to produce a constant periodic rate
of charge on the outstanding balance.


The expected cost of providing pensions is recognised on a
systematic basis over the period during which the employer derives
benefit from the employees’ services.

The difference between
amounts charged to profit and loss and contributions paid is reflected
in the balance sheet as a prepayment or accrual.


Turnover, profit before tax and net assets should be reported
by class of business and by geographical segment.

Segmental reporting
is not required where, in the opinion of the directors, it would
be seriously prejudicial to the interests of the company.

FRS1 Requires companies
to publish a cash flow statement showing nine categories of cash flow:

  • operating

  • dividends
    from associates and joint ventures

  • returns
    on investments

  • tax

  • capital
    expenditure and financial investment

  • acquisitions
    and disposals

  • equity
    dividends paid

  • management
    of liquid resources

  • financing

FRS2 Requires a parent to
prepare consolidated financial statements including the results and
net assets of its subsidiaries.


Requires the profit and loss account to distinguish from turnover
to operating profit, continuing operations (with acquisitions shown
separately) and discontinued operations.

Requires a fourth primary
statement – the statement of total recognised gains and losses.


Requires capital instruments to be classified as liabilities
if they contain an obligation to transfer economic benefits and as
shareholders funds if they do not contain an obligation to transfer
economic benefits.

Immediately after issue,
all capital instruments are to be stated at the net proceeds (fair
value – issue costs).


Requires the substance of transactions (rather than the legal
form) to be reported in the financial statements.

Assets and liabilities
are only recognised if there is sufficient evidence of existence
and they can be measured at a monetary amount with sufficient reliability.

FRS6 Restricts the use of merger accounting
to business combinations in which the shareholders of the combining
parties share mutually the risks and benefits of the combined entity
and in which no party is seen to be dominant.


Requires goodwill to be calculated by reference to fair values
which reflect conditions at acquisition.

All post acquisition
items (e.g. reorganisation costs, operating losses) are to be reported
in post acquisition results.


Requires disclosure of ultimate controlling party and of material
transactions with related parties.

There are a number
of exemptions regarding groups.


Requires associates to be included in consolidated FS using
the equity method. In P&L, include share of associates’
operating profit, interest and exceptional items. In BS, include share
of net assets.

Requires joint ventures
to be included in consolidated FS using the gross equity method.
In addition to above, in BS show (on face of BS) share of gross
assets and liabilities and in P&L show (distinguished from group
turnover) share of turnover.


Purchased goodwill and intangibles to be capitalised as assets.

Where goodwill and
intangibles have a limited useful economic life, they are to be
amortised over those lives. Where goodwill and intangibles have
an indefinite useful economic life, they should not be amortised
but are to be subject to an annual impairment review.


Requires fixed assets to be tested for impairment if events
indicate carrying value may not be recoverable.

Fixed assets to be written down to recoverable amount (higher
of net realisable value and value in use) if this is less than carrying

FRS12 Provisions only to be recognised

  • there is a present obligation as the result of a past event;

  • it is probable that there will be an outflow of benefits;

  • the amount can be estimated reliably.

Contingent liabilities to be disclosed
unless remote.


Narrative disclosure of objectives, policies and strategies

Numerical disclosure of interest rate risk, currency risk,
liquidity risk, fair values, trading instruments, hedging instruments
and certain commodity contracts required.

FRS14 Only dilutive potential ordinary
shares to be included in calculation of fully diluted EPS.  Potential
dilution with regard to share options to be  based on comparison
of issue/exercise price and average share price in period.


Revaluation is still optional but must be kept up to date by
full revaluation at least every 5 years.

With the exception of non-depreciable land, annual impairment
reviews must be performed if tangible fixed assets are not depreciated
or are depreciated over a period exceeding 50 years.


The tax charge
in the profit and loss account will include:

Corporation tax (current and deferred) for the

current year

Amounts under or over provided in the prior

Dividends received from UK companies are reported as the net
amount received.  Dividends received from other countries are
reported gross only to the extent that they have suffered a withholding


Defined benefit
scheme assets are to be measured at fair value.  Surpluses
and deficits in defined benefit schemes are to be recognised as
assets and liabilities by the employer (in most circumstances).
Changes in the defined benefit asset or liability are to be analysed
into various components, some of which affect earnings (as pension
costs or finance costs) and some of which by-pass the profit and
loss account.

SSAP24 will be


Accounting policies
should be consistent with accounting standards, UITF Abstracts and
companies legislation.  Appropriateness to particular circumstances
should be judged against the objectives of relevance, reliability,
comparability and understandability.

SSAP2 will be superceded.


Full provision
is to be made for deferred tax assets and liabilities arising from
timing differences between the recognition of gains and losses in
the financial statements and their recognition in a tax computation.
Discounting of deferred tax assets and liabilities will be permitted
but not required.

SSAP15 will be

Extant at 1 January 2001

4   Presentation of long-term debtors in current

5   Transfers from current assets to fixed assets

9   Accounting for operations in hyper-inflationary

10 Disclosure of directors’ share options

11 Capital instruments: issuer call options

12 Lessee accounting for reverse premiums and similar incentives

13 Accounting for ESOP trusts

15 Disclosure of substantial acquisitions

17 Employee share schemes

19 Tax on gains and losses that hedge an investment in a foreign

21 Accounting issues arising from the proposed introduction
of the Euro

22 The acquisition of  a Lloyd’s business

23 Application of the transitional rules in FRS15

24 Accounting for start-up costs

25 National Insurance contributions on share option gains

26 Barter transactions for advertising

27 Revisions to estimates of the useful economic life of goodwill
and intangible assets


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