CCAB launches consultation on changes to the LLPs SORP
The Consultative Committee of Accounting Bodies (CCAB) seeks comments on a consultation draft of the Statement of Recommended Practice on accounting by limited liability partnerships (LLPs SORP).
About the LLPs SORP consultation
The SORP deals with accounting matters specific to LLPs to ensure that, as far as possible, they present financial statements that are comparable with those of other entities.
In response to stakeholder feedback received in 2021, the SORP is being updated in the following areas:
- Amounts payable to former LLP members
- Sharing of group profits – interests in subsidiaries
- Automatic division of profits to members who do not provide any services to the LLP
- Climate change reporting
It is important to note that the proposed changes set out in the consultation draft don't consider any changes to the LLPs SORP that might be necessary in the future to reflect the possible changes to FRS 102 (the financial reporting standard applicable in the UK and Republic of Ireland) that are currently being considered by the Financial Reporting Council following its latest periodic review.
Kate Wolstenholme, Chair of the CCAB LLPs SORP Steering Group, commenting on the consultation said:
“The steering group carefully considered the feedback from the 2021 consultation of the LLPs SORP and agreed that further guidance would be helpful in several places. We believe the proposed additional guidance will improve the overall usefulness of the LLPs SORP. We encourage constituents to consider the consultation draft carefully and we look forward to hearing their views on it.”
Proposed changes to the LLPs SORP
The proposed changes to the SORP are summarised as follows:
Amounts payable to former members
Guidance has been added on certain narrow scenarios where section 26 of FRS 102 on share-based payment may apply.
Sharing of group profits – interests in subsidiaries
Guidance has been added on how a parent LLP should account for a subsidiary that is also an LLP in its group financial statements.
The guidance specifically covers the treatment of LLP members’ debt and equity interests in the subsidiary for the purpose of determining whether a non-controlling interest in the net assets of the group is recognised.
Automatic division of profits to members who do not provide any services to the LLP
An LLP may have two distinct types of members, all providing capital to it:
- Those that provide services in return for a share of profits; and
- Those that do not provide services, but still receive a share of profits.
Guidance has been added to the SORP on the treatment of profits which are automatically divided between members who do not provide any services to the LLP.
Climate change reporting
In addition to the above proposed changes, the LLPs SORP has been updated to reflect the new requirements for certain LLPs to provide climate-related financial disclosures in either their strategic report, if one is prepared, or in their energy and carbon report otherwise.
Following the closure of this consultation, the proposed changes are expected to be effective for periods commencing on or after 1 January 2024.