Consultation: Draft Statement of Recommended Practice – Accounting by Limited Liability Partnership 2022

CCAB has published an updated draft Statement of Recommended Practice (SORP) on accounting by Limited Liability Partnerships (LLPs) for comment by 24 September 2021.

The draft LLPs SORP has been updated in response to stakeholder feedback that there is diversity in practice when interpreting whether divisions of profit are automatic or discretionary in certain situations. As a result of this review CCAB is proposing:

• Changes to the definitions included in the SORP relating to divisions of profit.
• Further consequential amendments throughout the SORP to ensure consistency of terminology.
• Additional guidance to help determine when an LLP has an unconditional right to avoid delivering cash or other assets to members.
• Changes to the ordering of the SORP to ensure that the guidance on the division of profits is presented together, reduce duplication, and improve the overall flow of the document.

CCAB has also identified some diversity in practice for how automatic and discretionary divisions of profit are presented in the cash flow statement. To address this diversity, CCAB is proposing:

• Additional guidance which sets out the basis for alternative classifications of cash flows relating to profit distributions.
• A requirement for LLPs to disclose their accounting policy for classifying share of profits in the cash flow statement and that cash flows be classified consistently from period to period.

CCAB is also taking this opportunity to propose other minor clarifications to the SORP where appropriate. This includes updates to reflect the requirement for large LLPs and groups to produce an energy and carbon report as part of the annual report.

The SORP applies UK generally accepted accounting practice (GAAP) to LLPs incorporated in the UK and the Republic of Ireland. The proposed changes would be effective for financial years beginning on or after 1 January 2022.