S.I. No. 294/1992 - European Communities (Credit Institutions : Accounts) Regulations, 1992

S.I. No. 294 of 1992.

EUROPEAN COMMUNITIES (CREDIT INSTITUTIONS : ACCOUNTS) REGULATIONS, 1992.

TABLE OF CONTENTS

Regulations

1. Citation and Construction.

2. Interpretation.

3. Amendment of Act of 1986.

4. Date of Application.

5. Drawing up of Accounts.

6. Publication of Accounts in Full or Abbreviated Form.

7. Group Accounts.

8. Wholly-owned Subsidiaries.

9. Bank holding Companies.

10. Information on Related Undertakings.

11. Directors' Report.

12. Non-Application of Principal Act.

13. Auditors' Reports.

14. Publication of Accounts of Credit Institutions incorporated outside the State.

15. Offences.

SCHEDULE

Form and content of accounts of credit institutions and groups.

PART I—Individual accounts.

PART II—Form and content of group accounts.

PART III—Disclosure of information: related undertakings.

PART IV—Interpretation.

S.I. No. 294 of 1992.

EUROPEAN COMMUNITIES (CREDIT INSTITUTIONS : ACCOUNTS) REGULATIONS, 1992.

I, BERTIE AHERN, Minister for Finance, in exercise of the powers conferred on me by section 3 of the European Communities Act, 1972 (No. 27 of 1972), and for the purpose of giving effect to Council Directives 86/635/EEC of 8 December 1986^1 and 89/117/EEC of 13 February 1989^2 hereby make the following regulations:

1 Citation and Construction.

1. (1) These Regulations may be cited as the European Communities (Credit Institutions: Accounts) Regulations, 1992.

• (2) These Regulations shall be construed as one with the Companies Acts, 1963 to 1990.

2 Interpretation.

2. (1) In these Regulations, unless the context otherwise requires—

"accounts" means the balance sheet, profit and loss account and any notes on the accounts or statements forming part of the accounts whether or not required by law;

"annual return" means the annual return made to the registrar of companies under the Principal Act;

"associated undertaking" has the same meaning as in the European Communities (Companies: Group Accounts) Regulations 1992, ( S.I. No. 201 of 1992 );

"the Bank" means the Central Bank of Ireland;

"the Directive" means Council Directive 86/635/EEC of 8 December 1986;

"the Principal Act" means the Companies Act, 1963 ;

"the Act of 1986" means the Companies (Amendment) Act, 1986 (No. 25 of 1986);

^1O.J. No. L372 of 31/12/1986

^2O.J. No. L44 of 16/2/1989

"group accounts" means the accounts prepared in accordance with regulation 7;

"individual accounts" means the accounts prepared in accordance with regulation 5;

"parent company" means a company that has subsidiaries;

"section 2 (2) company" means any company incorporated in the State and referred to in subsection (2) (other than paragraph (b)) of section 2 of the Act of 1986;

"section 2 (2) parent company" has the meaning assigned to it by regulation 7 (1);

"undertaking" and "subsidiary undertaking" have the same meanings as in the European Communities (Companies: Group Accounts) Regulations, 1992.

• (2) A word or expression in these Regulations shall have the same meaning as in the Council Directive 86/635/EEC of 8 December 1986 unless the contrary is indicated.

• (3) In these Regulations, unless the context otherwise requires, a reference to a regulation is to a regulation of these Regulations, a reference to a paragraph is to the paragraph of the Regulation, and a reference to a subparagraph is to the subparagraph of the paragraph, in which the reference occurs.

• (4) In these Regulations, unless the context otherwise requires, a reference to a balance sheet or profit and loss account shall include a reference to any notes to or documents annexed to the accounts in question giving information which is required by any provision of the Companies Acts, 1963 to 1990, or these Regulations and required or allowed by any such provision to be given in a note to or a document annexed to a company's accounts.

• (5) In these Regulations:

• (i) a reference to directors shall be construed, in the case of an undertaking which does not have a board of directors, as a reference to the corresponding persons appropriate to such undertaking;

• (ii) a reference to voting rights in an undertaking means the rights conferred on shareholders in respect of their shares or, in the case of an undertaking not having a share capital, or members, to vote at general meetings of the undertaking on all, or substantially all, matters;

• (iii) in relation to an undertaking which does not have general meetings at which matters are decided by the exercise of voting rights, the references to holding a majority of the voting rights in an undertaking shall be construed as references to having the right under the constitution of the undertaking to direct the overall policy of the undertaking to alter the terms of its constitution.

3 Amendment of Act of 1986.

3. Section 7 (1) of the Act of 1986 is hereby amended by the deletion of subparagraph (a) (ii) and the insertion of the following subparagraph:—

• "(ii) in the case of a company to which subsection (2) (other than paragraph (b)) of section 2 of this Act applies, a copy of the balance sheet and profit and loss account of the company drawn up in accordance with the European Communities (Credit Institutions: Accounts) Regulations, 1992,".

4 Date of Application.

4. These Regulations shall apply to the individual and group accounts of a section 2 (2) company drawn up in respect of every financial year beginning on or after the 1st day of January 1993 and the requirements of section 7 (1) (a) (ii) of the Act of 1986 shall come into operation on that date.

5 Drawing up of Accounts.

5. (1) Subject to paragraph (2), every balance sheet and profit and loss account of a section 2 (2) company laid before the annual general meeting of the company, pursuant to section 148 of the Principal Act, shall comply with the following requirements and section 149 (other than subsection (5) and, insofar as it relates to the said subsection (5), subsection (7)) of that Act shall not apply to any such balance sheet or profit and loss account:

( a ) every such balance sheet and profit and loss account shall comply with the provisions of the Schedule to these Regulations,

( b ) every such balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of its financial year and every such profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year,

( c ) where a balance sheet or profit and loss account drawn up in accordance with subparagraph (a) would not provide sufficient information to comply with subparagraph (b), any necessary additional information shall be provided in that balance sheet or profit and loss account or in a note to the accounts,

( d ) where, owing to special circumstances, the preparation of accounts of a company in compliance with subparagraph (a) would prevent those accounts from complying with subparagraph (b) (even if additional information were provided under subparagraph (c)) the directors of the company shall depart from the requirements of the said Schedule in preparing those accounts insofar as is necessary in order to comply with that subparagraph,

( e ) where the directors of a company depart from the requirements of this regulation, they shall attach a note to the accounts of the company giving details of the particular departures made, the reasons therefor and the effect of those departures on the accounts,

and, accordingly, in the Companies Acts, 1963 to 1990, in relation to a company to which these Regulations applies—

• (i) references to the said section 149 shall be construed as references to that section as modified by the provisions of these Regulations, and

• (ii) references to the Sixth Schedule shall be construed as references to the corresponding provisions of the Schedule to these Regulations.

• (2) Paragraph (1) shall not apply to the profit and loss account of a company if—

( a ) the company is a parent undertaking, and

( b ) the company is required to prepare and does prepare group accounts in accordance with these Regulations, and

( c ) the notes to the company's individual balance sheet show the company's profit and loss for the financial year determined in accordance with these Regulations.

• (3) Where, in the case of a company, advantage is taken of paragraph (2), that fact shall be disclosed in a note to the individual and group accounts of the company.

• (4) Subparagraph (b) of paragraph (1) overrides the requirements of the Schedule to these Regulations and all other requirements of the Companies Acts, 1963 to 1990, as to the matters to be included in the accounts of a company or in notes to those accounts and, accordingly, where a balance sheet or profit and loss account of a company drawn up in accordance with those requirements would not provide sufficient information to comply with the said subparagraph, any necessary additional information shall be provided in that balance sheet or profit and loss account or in a note to the accounts.

6 Publication of Accounts in Full or Abbreviated Form.

6. (1) Where a company publishes its full accounts, it shall also publish with those accounts any report in relation to those accounts by the auditors of the company under section 193 of the Companies Act, 1990 .

• (2) Where a company publishes abbreviated accounts relating to any financial year, it shall also publish a statement indicating—

( a ) that the accounts are not the accounts copies of which are required to be annexed to the annual return,

( b ) whether the copies of the accounts so required to be so annexed have in fact been so annexed,

( c ) whether the auditors of the company have made a report under section 193 of the Companies Act, 1990 , in respect of the accounts of the company which relate to any financial year with which the abbreviated accounts purport to deal,

( d ) whether the report of the auditors under the said section 193 contained any qualifications as to the matters mentioned in that section.

• (3) Where a company publishes abbreviated accounts, it shall not publish with those accounts any such report of the auditors as is mentioned in paragraph (2) (c).

• (4) Where a company publishes its full individual accounts for a financial year it shall indicate if group accounts have been prepared and if so where those group accounts can be obtained.

• (5) In this regulation—

"abbreviated accounts", in relation to a company, means any balance sheet or profit and loss account, or summary or abstract of a balance sheet or profit and loss account, relating to a financial year of the company which is published by the company otherwise than as part of the full accounts of the company for that financial year and, in relation to a parent company, includes an account in any form purporting to be a balance sheet or profit and loss account, or a summary or abstract of a balance sheet or profit and loss account, of the group consisting of the parent company and its subsidiaries;

"company" means a section 2 (2) company;

"full accounts" means the individual or group accounts required to be annexed to the annual return;

"publish", in relation to a document, includes issue, circulate or otherwise make it available for public inspection in a manner calculated to invite the public generally, or any class of members of the public, to read the document, and cognate words shall be construed accordingly.

7 Group Accounts.

7. (1) This regulation applies to a parent company which is a section 2 (2) company (in these Regulations referred to as a "section 2 (2) parent company") whether or not it is itself a subsidiary of another undertaking.

• (2) A company to which this regulation applies shall not be entitled to take advantage of section 154 of the Principal Act in relation to the preparation of group accounts or of subsections (2) or (3) of section 151 of the Principal Act in relation to the form of group accounts.

• (3) Every parent company to which this regulation applies shall, subject to paragraph (5), prepare group accounts at the end of its financial year dealing with the state of affairs and profit or loss of the company and its subsidiaries (including those in liquidation and those with registered offices outside the State) in accordance with the provisions of Part I of the Schedule to these Regulations, as modified by Part II of the Schedule, and every such group accounts shall be laid before the next annual general meeting of the company at the same time as the individual accounts of the company are so laid and shall be annexed to the annual return of the company.

• (4) The report of the auditors on the group accounts laid before the annual general meeting shall be annexed to the annual return referred to in paragraph (3).

• (5)
• (i) The group accounts laid before the annual general meeting of a company shall give a true and fair view of the state of affairs and profit or loss of the company and subsidiaries dealt with thereby as a whole, so far as concerns members of the company.

• (ii) The group accounts shall comprise the consolidated balance sheet dealing with the state of affairs of the parent and its subsidiaries as a whole, the consolidated profit and loss account dealing with the profit and loss of the parent and its subsidiaries as a whole and the notes on the accounts giving the information required by these Regulations or otherwise provided by the company.

• (iii) Where group accounts drawn up in accordance with paragraph (3) would not provide sufficient information to comply with subparagraph (i) of this paragraph, any necessary additional information shall be given in the group accounts or in a note to the accounts.

• (iv) Where, owing to special circumstances, the preparation of group accounts in compliance with paragraph (3) would prevent those accounts from complying with subparagraph (i) of this paragraph (even if additional information were given under subparagraph (iii) of this paragraph), the directors of the parent company shall depart from the requirements of Parts I and II (other than paragraph 2 of Part II) of the Schedule to these Regulations in preparing these accounts insofar as it is necessary in order to comply with that paragraph.

• (v) Where the directors of a parent company depart from the requirements of these Regulations in compliance with subparagraph (iv), they shall attach a note to the group accounts of the company giving details of the particular departures made, the reasons therefore and the effect of those departures on the accounts.

• (6) Where a document annexed to the annual return under this regulation or Regulations 8, 9, 10 or 11 is in a language other than English or Irish, there shall be annexed to any such document a translation in the English or Irish language certified in the prescribed manner to be a correct translation.

• (7) The annual and group accounts, if any, of a subsidiary undertaking excluded from group accounts by virtue of the application of paragraph 2 of Part II of the Schedule to these Regulations shall be attached to the group accounts, or annexed to the annual return, of the parent company.

• (8) Paragraph (7) shall not apply where the subsidiary undertaking has otherwise annexed the relevant accounts referred to in that paragraph to its annual return.

8 Wholly-owned Subsidiaries.

8. (1) Paragraph (3) of regulation 7 shall not apply to a section 2 (2) parent company which is itself a wholly-owned subsidiary of another undertaking established in a Member State of the Community ("the parent undertaking") if paragraph (3) of this regulation is complied with; provided that the fact that the advantage of this regulation is being availed of shall be disclosed in a note to the accounts of the section 2 (2) parent company annexed to its annual return under the Principal Act.

• (2) In this regulation, a company shall be deemed to be a wholly-owned subsidiary of another if:

( a ) it would be so deemed for the purposes of section 150 of the Principal Act, or

( b ) that other holds 90 per cent or more of the shares in the company and the remaining shareholders in the company have approved the treatment of the company as a wholly-owned subsidiary under this regulation.

• (3) The requirements referred to in paragraph (1) are as follows:

( a ) the company and its subsidiaries must be dealt with in group accounts prepared by the parent undertaking;

( b ) the group accounts and the group report of the parent undertaking must be prepared and audited in accordance with the Directive or Directive 83/349/EEC of 13 June 1983^1, as the case may be;

( c ) the following must be annexed to the annual return of the company next after the group accounts have been prepared in accordance with subparagraph (a):

• (i) the group accounts referred to in subparagraph (b),

• (ii) the group annual report referred to in subparagraph (b), and

• (iii) the report of the person responsible for auditing the accounts referred to in subparagraph (b),

( d ) the notes on the annual accounts of the company must disclose:

• (i) the name and registered office of the parent undertaking that draws up the group accounts referred to in subparagraph (b), and

^1O.J. No. L193 of 18/7/1983

• (ii) the exemption from the obligation to draw up group accounts and a group annual report.

• (4) The exemption does not apply to a company any of whose shares, debentures or other debt instruments are listed on a stock exchange in any Member State of the Community.

• (5) The Minister may, after consultation with the Bank, require that additional information shall be provided in the consolidated accounts of the parent undertaking or the individual accounts of the section 2 (2) parent company referred to in paragraph (1) of this regulation in accordance with Article 9 of Directive 83/349/EEC.

• (6) This regulation shall also apply to a section 2 (2) parent company not falling under the provisions of paragraph (2) of this regulation which is itself a subsidiary of a parent undertaking established in a Member State of the Community if the shareholders or members holding in total 10 per cent of the nominal value of the shares of the parent company concerned have not at any time that is not later than six months before the end of the financial year in question requested the preparation of group accounts by that parent company in respect of that financial year.

9 Bank holding Companies.

9. (1) The obligation to prepare group accounts in accordance with regulation 7 also applies to a parent company:

• (i) which does not itself carry on any material business apart from the acquisition, management and disposal of interests in subsidiaries; and

• (ii) whose principal subsidiaries are wholly or mainly credit institutions.

• (2) In paragraph (1), the management of interests in subsidiaries includes the provision of services to such subsidiaries and a parent company's principal subsidiaries are those subsidiaries of the company whose results or financial position would principally affect the figures shown in the group accounts.

10 Information on Related Undertakings.

10. (1) A company to which these Regulations apply shall give the information required by Part III of the Schedule to these Regulations by way of a note to its accounts or group accounts as the case may be.

• (2) ( a ) Subject to subparagraph (b), the information specified in paragraph (1) may, in lieu of being stated in a note to the accounts of the company concerned for any particular financial year of the company, be given in a statement in writing signed by a director and the secretary of the company and annexed to the first annual return made by the company next after its accounts for that year are laid before the annual general meeting of the company if, in the opinion of the directors of the company, compliance with paragraph (1) would require a note to the accounts of the company of excessive length.

( b ) Subparagraph (a) shall not apply;

• (i) in relation to information concerning a subsidiary of or an undertaking of substantial interest to a company (referred to subsequently in this subparagraph as the "second-mentioned company") if the financial state of that subsidiary or undertaking, as disclosed by its accounts, has, in the opinion of the directors of the second-mentioned company, a substantial effect on the profit or loss, or the amount of the assets, of the second-mentioned company and its subsidiaries, or

• (ii) in relation to any subsidiary excluded from consolidated accounts by virtue of paragraph 2 of Part II of the Schedule to these Regulations.

( c ) A copy of a statement annexed, pursuant to subparagraph (a), to the annual return referred to in that subparagraph made by a company shall be certified both by a director and the secretary of the company to be a true copy of such statement.

• (3) Section 16 of the Companies (Amendment) Act, 1986 , and subsections (4) and (5) of section 158 of the Principal Act shall not apply to a company to which this regulation applies.

• (4) If advantage is taken of paragraph (2) (a), the company shall indicate that the information required by Part III of the Schedule to these Regulations to be given in the notes to the accounts refers only to the undertakings referred to in paragraph (2) (b) and that the full information required has been annexed to the annual return referred to in paragraph (2) (a).

• (5) In this regulation, the expression "undertaking of substantial interest" means an undertaking falling within any of paragraphs 7, 18 or 19 of Part III of the Schedule to these Regulations.

11 Directors' Report.

11. In the case of a section 2 (2) parent company preparing group accounts in accordance with these Regulations, the report of the directors of that company under section 158 of the Principal Act, shall contain, in addition to the information specified in that section, the following information:

( a ) a fair review of the development of the business of the parent company and its subsidiary undertakings taken as a group during the financial year ending with the relevant balance sheet date;

( b ) particulars of any important events affecting the parent company or any of its subsidiary undertakings which have occurred since the end of that year;

( c ) an indication of likely future developments in the business of the parent company and its subsidiary undertakings, taken as a group;

( d ) an indication of the activities, if any, of the parent company and its subsidiary undertakings, taken as a group, in the field of research and development, and

( e ) the number and nominal value of shares in the parent company held by the company itself, by its subsidiary undertakings or by a person acting in his own name but on behalf of the company or subsidiary.

• (2) The information required by subparagraph (1) (e) may be given in the notes to the group accounts.

12 Non-Application of Principal Act.

12. Sections 150 (1), and (2), 151 (1), 152, 158 (4), (5) and 6) and 191 of the Principal Act shall not apply to a company to which regulation 7 applies and the reference to subsection (1) in subsection (4) of section 150 shall be construed as a reference to regulation 7.

13 Auditors' Reports.

13. (1) The auditors of a section 2 (2) company shall make report to the members in accordance with section 193 of the Companies Act, 1990 , and the company shall not be entitled to rely on the exemption referred to in subsection (4) ( f ) of section 193 in relation to the preparation of its accounts.

• (2) The report of the auditors shall also contain the information required by section 15 of the Companies (Amendment) Act, 1986 , in relation to both the individual and group accounts prepared by a company to which these Regulations apply.

14 Publication of Accounts of Credit Institutions incorporated outside the State.

14. (1) Every credit institution incorporated outside the State which has a place of business in the State shall publish its individual accounts and its group accounts, together with the report of the directors and auditors, in such manner as may be prescribed by the Bank in accordance with Article 44 of the Directive.

• (2) In implementing the provisions of this regulation, the Bank shall apply the provisions of Directive 89/117/EEC of 13 February 1989^1 and, in particular, Articles 2, 3 and 4 thereof.

• (3) This regulation shall also apply to any financial institution incorporated outside the State with a place of business in the State which would, if it were incorporated in the State, be subject to licensing or supervision by the Bank.

• (4) In paragraph (3), "financial institution" does not include an insurance company or undertaking.

15 Offences.

15. (1) ( a ) If a company to which these Regulations apply fails to comply with a provision of these Regulations, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding £1,000.

^1O.J. No. L44 of 16/2/1989

( b ) Proceedings for an offence under this regulation may be brought and prosecuted by the Bank or, in the case of a failure by a company to annex or attach any document required by these Regulations to be annexed or attached to the annual return of that company, by the registrar of companies.

• (2) If any person, being a director of a company to which these Regulations apply, fails to take all reasonable steps to secure compliance with a requirement of these Regulations, he shall, in respect of each offence, be liable on summary conviction to imprisonment for a term not exceeding 12 months, or, at the discretion of the court, to a fine not exceeding £1,000, or to both.

• (3) In any proceedings against a person for an offence under paragraph (2), it shall be a defence for a director to prove that he had reasonable grounds to believe and did believe that a competent and reliable person was charged with the duty of ensuring that the provisions of these Regulations were complied with and that the latter person was in a position to discharge that duty, and a person shall not be liable to be sentenced to imprisonment for an offence under the said paragraph (2) unless, in the opinion of the court, the offence was committed wilfully.

• (4) If any person in any balance sheet, profit and loss account, report, note or other document required by or for the purposes of any provision of these Regulations wilfully makes a statement false in any material particular, knowing it to be false, he shall be liable on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding £1,000 or to both.

• (5) In this section "director" and "officer" includes any person in accordance with whose instruction or directions the directors of the company are accustomed to act.

SCHEDULE

Regulation 5

FORM AND CONTENTS OF ACCOUNTS OF CREDIT INSTITUTIONS AND GROUPS

PART I INDIVIDUAL ACCOUNTS

CHAPTER I GENERAL RULES AND FORMATS

SECTION A

GENERAL RULES

1.—(1) Subject to the following provisions of this Part of this Schedule:

( a ) every balance sheet of a company shall show the items listed in the balance sheet format set out below in section B of this Chapter of this Schedule; and

( b ) every profit and loss account of a company shall show the items listed in either of the profit and loss account formats so set out;

in either case in the order and under the headings and sub-headings given in the format adopted.

• (2) Subparagraph (1) above is not to be read as requiring the heading or sub-heading for any item to be distinguished by any number or letter assigned to that item in the format adopted.

2.—(1) Where in accordance with paragraph 1 a company's profit and loss account for any financial year has been prepared by reference to one of the formats set out in section B below, the directors of the company shall adopt the same format in preparing the profit and loss account for subsequent financial years of the company unless in their opinion there are special reasons for a change.

• (2) Particulars of any change in the format adopted in preparing a company's profit and loss account in accordance with paragraph 1 shall be disclosed, and the reasons for the change shall be explained, in a note to the accounts in which the new format is first adopted.

3.—(1) Any item required in accordance with paragraph 1 to be shown in a company's balance sheet or profit and loss account may be shown in greater detail than so required.

• (2) A company's balance sheet or profit and loss account may include an item representing or covering the amount of any asset or liability, income or expenditure not specifically covered by any of the items listed in the balance sheet format provided or the profit and loss account format adopted, but the following shall not be treated as assets in any company's balance sheet:

• (i) preliminary expenses;

• (ii) expenses of and commission on any issue of shares or debentures; and

• (iii) costs of research.

• (3) Items to which lower case letters are assigned in any of the formats set out in section B below may be combined in a company's accounts for any financial year if either:

( a ) their individual amounts are not material for the purpose of giving a true and fair view; or

( b ) the combination facilitates the assessment of the state of affairs or profit or loss of the company for that year;

but in a case within paragraph (b) the individual amounts of any items so combined shall be disclosed in a note to the accounts and any notes required by this Schedule to the items so combined shall, not withstanding the combination, be given.

• (4) Subject to paragraph 4 (3) below, a heading or sub-heading corresponding to an item listed in the balance sheet format or the profit and loss account format adopted in preparing a company's balance sheet or profit and loss account shall not be included if there is no amount to be shown for that item in respect of the financial year to which the balance sheet or profit and loss account relates.

4.—(1) In respect of every item shown in the balance sheet or profit and loss account, there shall be shown or stated the corresponding amount for the financial year immediately preceding that to which the accounts relate.

• (2) Where the corresponding amount is not comparable with the amount to be shown for the item in question in respect of the financial year to which the balance sheet or profit and loss account relates, the former amount shall be adjusted and particulars of the adjustment and the reasons for it shall be given in a note to the accounts.

• (3) Paragraph 3 (4) does not apply in any case where an amount can be shown for the item in question in respect of the financial year immediately preceding that to which the balance sheet or profit and loss account relates, and that amount shall be shown under the heading or sub-heading required by paragraph 1 for that item.

5.—(1) Subject to the following provisions of this paragraph and without prejudice to note (6) to the balance sheet format, amounts in respect of items representing assets or income may not be set off against amounts in respect of items representing liabilities or expenditure (as the case may be), or vice versa.

• (2) Charges required to be included in profit and loss account format 1, items 11 (a) and 11 (b) or format 2, items A7 (a) and A7 (b) may however be set off against income required to be included in format 1, items 12 (a) and 12 (b) or format 2, items B5 (a) and B5 (b) and the resulting figure shown as a single item (in format 2 at position A7 if negative and at position B5 if positive).

• (3) Charges required to be included in profit and loss account format 1, item 13 or format 2, item A8 may also be set off against income required to be included in format 1, item 14 or format 2, item B6 and the resulting figure shown as a single item (in format 2 at position A8 if negative and at position B6 if positive).

6.—(1) Assets shall be shown under the relevant balance sheet headings even where the company has pledged them as security for its own liabilities or for those of third parties or has otherwise assigned them as security to third parties.

• (2) A company shall not include in its balance sheet assets pledged or otherwise assigned to it as security unless such assets are in the form of cash in the hands of the company.

( a ) any transfer between the profit and loss account and reserves;

( b ) separately, the aggregate amount of any dividends paid and proposed to be paid;

( c ) any increase or reduction in the balance on the profit and loss account since the immediately preceding financial year;

( d ) the profit or loss brought forward at the beginning of the financial year; and

( e ) the profit or loss carried forward at the end of the financial year.

SECTION B

THE REQUIRED FORMATS FOR ACCOUNTS

PRELIMINARY

9.—(1) Reference in this Part of this Schedule to the balance sheet format or to profit and loss account formats are to the balance sheet format or profit and loss account formats set out below and references to the items listed in any of the formats are to those items read together with any of the notes following the formats for alternative positions for any particular items.

• (2) The requirement imposed by paragraph 1 of this Part of this Schedule to show the items listed in any such format in the order adopted in the format is subject to any provision in the notes following the formats for alternative positions for any particular items.

BALANCE SHEET FORMAT

Assets

( a ) Exchequer bills and similar securities (2)

( b ) Other eligible bills (3)

( a ) Repayable on demand

( b ) Other loans and advances

( a ) Issued by public bodies

( b ) Issued by other issuers

Total Assets

LIABILITIES

( a ) Repayable on demand

( b ) With agreed maturity dates or periods of notice

( a ) Repayable on demand

( b ) With agreed maturity dates or periods of notice

( a ) Bonds and medium term notes

( b ) Others

( a ) Provisions for pensions and similar obligations

( b ) Provisions for tax

( c ) Other provisions

( a ) Capital redemption reserved

( b ) Reserve for own shares

( c ) Reserves provided for by the articles of association

( d ) Other reserves

Total Liabilities

OFF-BALANCE SHEET ITEMS

• (1) Acceptances and endorsements

• (2) Guarantees and assets pledged as collateral security (17)

• (3) Other contingent liabilities

• (1) Commitments arising out of sale and option to resell transactions (19)

• (2) Other commitments

NOTES ON THE BALANCE SHEET FORMAT AND OFF-BALANCE SHEET ITEMS

• (1) Cash and balances at central and post office banks (Assets item 1) Cash shall comprise all currency including foreign notes and coins. Only those balances which may be withdrawn without notice and which are deposited with central or post office banks of the country or countries in which the company is established shall be included in this item. All other claims on central banks must be shown under assets items 3 or 4.

• (2) Central Government bills and other eligible bills: Exchequer bills and similar securities (Assets item 2 (a))

Central Government bills and similar securities shall comprise Exchequer bills and similar debt instruments issued by public bodies which are eligible for refinancing with central banks of the country or countries in which the company is established. Any bills or similar debt instruments not so eligible shall be included under Assets item 5, sub-item (a).

• (3) Exchequer bills and other eligible bills: other eligible bills (Assets item 2 (b))

Other eligible bills shall comprise all bills purchased to the extent that they are eligible, under national law, for refinancing with the central banks of the country or countries in which the company is established.

• (4) Loans and advances to banks (Assets item 3)

Loans and advances to banks shall comprise all loans and advances to domestic or foreign credit institutions made by the company arising out of banking transactions. However loans and advances to credit institutions represented by debt securities or other fixed income securities shall be included under Assets item 5 and not this item.

• (5) Loans and advances to customers (Assets item 4)

Loans and advances to customers shall comprise all types of assets in the form of claims on domestic and foreign customers other than credit institutions. However loans and advances represented by debt securities or other fixed income securities shall be included under Assets item 5 and not this item.

• (6) Debt securities and other fixed income securities (Assets item 5)

This item shall comprise transferable debt securities and any other transferable fixed income securities issued by credit institutions, other undertakings or public bodies. Debt securities and other fixed income securities issued by public bodies shall however only be included in this item if they may not be shown under Assets item 2.

Where a company holds its own debt securities these shall not be included under this item but shall be deducted from Liabilities item 3 (a) or (b), as appropriate.

Securities bearing interest rates that vary in accordance with specific factors, for example the interest rate on the inter-bank market or on the Euromarket, shall also be regarded as fixed income securities to be included under this item.

• (7) Intangible fixed assets (Assets item 9)

This item shall comprise:

( a ) development costs;

( b ) concessions, patents, licenses, trade marks and similar rights and assets;

( c ) goodwill; and

( d ) payments on account.

Amounts shall, however, be included in respect of (b) only if the assets were acquired for valuable consideration or the assets in question were created by the company itself.

Amounts representing goodwill shall only be included to the extent that the goodwill was acquired for valuable consideration.

There shall be disclosed, in a note to the accounts, the amount of any goodwill included in this item.

• (8) Tangible fixed assets (Assets item 10)

This item shall comprise:

—land and buildings;

—plant and machinery;

—fixtures and fittings, tools and equipment; and

—payments on account and assets in the course of construction.

There shall be disclosed in a note to the accounts the amount included in this item with respect to land and buildings occupied by the company for its own activities.

• (9) Called up capital not paid (Assets item 11 and 14) The two positions shown for this item are alternatives.

• (10) Own Shares (Assets item 12)

The nominal value of the shares held shall be shown separately under this item.

• (11) Deposits by banks (Liabilities item 1)

Deposits by banks shall comprise all amounts arising out of banking transactions owed to other domestic or foreign credit institutions by the company. However liabilities in the form of debt securities and any liabilities for which transferable certificates have been issued shall be included under Liabilities item 3 and not this item.

• (12) Customer accounts (Liabilities item 2)

This item shall comprise all amounts owed to creditors that are not credit institutions. However liabilities in the form of debt securities and any liabilities for which transferable certificates have been issued shall be shown under Liabilities item 3 and not this item.

• (13) Debt securities in issue (Liabilities item 3)

This item shall include both debt securities and debts for which transferable certificates have been issued, including liabilities arising out of own acceptances and promissory notes. (Only acceptances which a company has issued for its own refinancing and in respect of which it is the first party liable shall be treated as own acceptances).

• (14) Subordinated liabilities (Liabilities item 7)

This item shall comprise all liabilities in respect of which there is a contractual obligation that, in the event of winding up or bankruptcy, they are to be repaid only after the claims of other creditors have been met.

This item shall include all subordinated liabilities, whether or not a ranking has been agreed between the subordinated creditors concerned.

• (15) Called up share capital (Liabilities item 8)

The amount of allotted share capital and the amount of called up share capital which has been paid up shall be shown separately.

• (16) Contingent liabilities (Off-balance sheet item 1)

This item shall include all transactions whereby the company has underwritten the obligations of a third party.

Liabilities arising out of the endorsement of rediscontinued bills shall be included in this item. Acceptances other than own acceptance shall also be included.

• (17) Contingent liabilities: Guarantees and assets pledged as collateral security (Off-balance sheet item 1 (2))

This item shall include all guarantee obligations incurred and assets pledged as collateral security on behald of third parties, particularly in respect of sureties and irrevocable letters of credit.

• (18) Commitments (Off-balance sheet item 2)

This item shall include every irrevocable commitment which could give rise to a credit risk.

• (19) Commitments: Commitments arising out of sale and option to resell transactions (Off-balance sheet item 2 (1))

This sub-item shall comprise commitments entered into by the company in the context of sale and option to resell transactions.

• (20) Claims on, and liabilities to, undertakings in which a participating interest is held or group undertakings (Assets items 2 to 5, Liabilities items 1 to 3 and 7)

The following information must be given either by way of subdivision of the relevant items or by way of notes to the accounts.

The amount of the following must be shown for each of Assets items 2 to 5:

( a ) claims on group undertakings included therein; and

( b ) claims on undertakings in which the company has a participating interest included therein.

The amount of the following must be shown for each of Liabilities items 1, 2, 3 and 7:

• (i) liabilities to group undertakings included therein; and

• (ii) liabilities to undertakings in which the company has a participating interest included therein.

SPECIAL RULES

Subordinated assets

11.—(1) The amount of any assets that are subordinated must be shown either as a subdivision of any relevant asset item or in the notes to the accounts; in the latter case disclosure shall be by reference to the relevant asset item or items in which the assets are included.

• (2) In the case of Assets items 2 to 5 in the balance sheet format, the amounts required to be shown by note (20) to the format as sub-items of those items shall be further subdivided so as to show the amount of any claims included therein that are subordinated.

• (3) For this purpose, assets are subordinated if there is a contractual obligation to the effect that, in the event of winding up or bankruptcy, they are to be repaid only after the claims of other creditors have been met, whether or not a ranking has been agreed between the subordinated creditors concerned.

Syndicated loans

12.—(1) Where a company is a party to a syndicated loan transaction the company shall include only that part of the total loan which it itself has funded.

• (2) Where a company is a party to a syndicated loan transaction and has agreed to reimburse (in whole or in part) any other party to the syndicate any funds advanced by that party or any interest thereon upon the occurrence of any event, including the default of the borrower, any additional liability by reason of such a guarantee shall be included as a contingent liability in off-balance sheet item 1, sub-item (2).

Sale and repurchase transactions

13.—(1) The following rules apply where a company is a party to a sale and repurchase transaction.

• (2) Where the company is the transferor of the assets under the transaction:

( a ) the assets transferred shall, notwithstanding the transfer, be included in its balance sheet;

( b ) the purchase price received by it shall be included in its balance sheet as an amount owed to the transferee; and

( c ) the value of the assets transferred shall be disclosed in a note to its accounts.

• (3) Where the company is the transferee of the assets under the transaction it shall not include the assets transferred in its balance sheet but the purchase price paid by it to the transferor shall be so included as an amount owed by the transferor.

Sale and option to resell transactions

14.—(1)The following rules apply where a company is a party to a sale and option to resell transaction.

• (2) Where the company is the transferor of the assets under the transaction it shall not include in its balance sheet the assets transferred but it shall enter under off-balance sheet item 2 an amount equal to the price agreed in the event of repurchase.

• (3) Where the company is the transferee of the assets under the transaction it shall include those assets in its balance sheet.

Managed funds

15.—(1) For the purpose of this paragraph "managed funds" are funds which the company administers in its own name but on behalf of others and to which it has legal title.

• (2) The company shall, in any case where claims and obligations arising in respect of managed funds fall to be treated as claims and obligations of the company, adopt the following accounting treatment: claims and obligations representing managed funds are to be included in the company's balance sheet, with the notes to the accounts disclosing the total amount included with respect to such assets and liabilities in the balance sheet and showing the amount included under each relevant balance sheet item in respect of such assets or (as the case may be) liabilities.

PROFIT AND LOSS ACCOUNT FORMATS

FORMAT 1

Vertical layout

( a ) Interest receivable and similar income arising from debt securities and other fixed income securities.

( b ) Other interest receivable and similar income.

( a ) Income from equity shares and other variable-yield securities.

( b ) Income from participating interests.

( c ) Income from shares in group undertakings.

( a ) Staff costs.

• (i) Wages and salaries.

• (ii) Social security costs.

• (iii) Other pension costs.

( b ) Other administrative expenses.

( a ) Provisions for bad and doubtful debts (7).

( b ) Provisions for contingent liabilities and commitments (8).

( a ) Adjustments to provisions for bad and doubtful debts (9).

( b ) Adjustments to provisions for contingent liabilities and commitments (10).

FORMAT 2

Horizontal layout

A. Charges

( a ) Staff costs.

• (i) Wages and salaries.

• (ii) Social security costs.

• (iii) Other pension costs.

( b ) Other administrative expenses.

( a ) Provisions for bad and doubtful debts (7).

( b ) Provisions for contingent liabilities and commitments (8).

B. Income

( a ) Interest receivable and similar income arising from debt securities and other fixed income securities.

( b ) Other interest receivable and similar income.

( a ) Income from equity shares and other variable-yield securities.

( b ) Income from participating interests.

( c ) Income from shares in group undertakings.

( a ) Adjustments to provisions for bad and doubtful debts (9).

( b ) Adjustments to provisions for contingent liabilities and commitments (10).

NOTES ON THE PROFIT AND LOSS ACCOUNT FORMATS

• (1) Interest receivable and similar income (Format 1, item 1; Format 2, item B1)

This item shall include all income arising out of banking activities, including:

( a ) income from assets included in Assets items 1 to 5 in the balance sheet format, however calculated;

( b ) income resulting from covered forward contracts, spread over the actual duration of the contract and similar in nature to interest; and

( c ) fees and commissions receivable similar in nature to interest and calculated on a time basis or by reference to the amount of the claim (but not other fees and commissions receivable).

• (2) Interest payable and similar charges (Format 1, item 2; format 2, item A1)

This item shall include all expenditure arising out of banking activities, including:

( a ) charges arising out of liabilities included in Liabilities items 1, 2, 3 and 7 in the balance sheet format, however calculated;

( b ) charges resulting from covered forward contracts, spread over the actual duration of the contract and similar in nature to interest; and

( c ) fees and commissions payable similar in nature to interest and calculated on a time basis or by reference to the amount of the liability (but not other fees and commissions payable).

• (3) Fees and commissions receivable (Format 1, item 4; Format 2, item B3)

Fees and commissions receivable shall comprise income in respect of all services supplied by the company to third parties, but not fees or commissions required to be calculated under interest receivable (Format 1, item 1 ; Format 2 ,item B1).

In particular the following fees and commissions receivable must be included (unless required to be included under interest receivable):

— fees and commissions for guarantees, loan administration on behalf of other lenders and securities transactions;

— fees, commissions and other income in respect of payment transactions, account administration charges and commissions for the safe custody and administration of securities;

— fees and commissions for foreign currency transactions and for the sale and purchase of coin and precious metals; and

— fees and commissions charged for brokerage services in connection with savings and insurance contracts and loans.

• (4) Fees and commissions payable (Format 1, item 5; format 2, item 2A)

Fees and commissions payable shall comprise charges for all services rendered to the company by third parties but not fees or commissions required to be included under interest payable (Format 1; item 2; Format 2. item A1).

In particular the following fees and commissions payable must be included (unless required to be included under interest payable):

— fees and commissions for guarantees, loan administration and securities transactions;

— fees, commissions and other charges in respect of payment transactions, account administration charges and commission for the safe custody and administration of securities;

— fees and commissions for foreign currency transactions and for the sale and purchase of coin and precious metals; and

— fees and commissions for brokerage service in connection with savings and insurance contracts and loans.

• (5) Dealing profits or losses (Format 1, item 6; Format 2, items B4 and A3)

This item shall comprise:

( a ) the net profit or net loss on transactions in securities which are not held as financial fixed assets together with amounts written off or written back with respect to such securities, including amounts written off or written back as a result of the application of paragraph 34 (1) below;

( b ) the net profit or loss on exchange activities, save in so far as the profit or loss is included in interest receivable or interest payable (Format 1, items 1 or 2; Format 2, items B1 or A1); and

( c ) the net profits and losses on other dealing operations involving financial instruments, including precious metals.

• (6) Depreciation and amortisation (Format 1, item 9; Format 2, item A5)

This item shall comprise depreciation and other amounts written off in respect of balance sheet Assets items 9 and 10.

• (7) Provisions: Provisions for bad and doubtful debts (Format 1, item 1 (a); Format 2, item 7 (a))

Provisions for bad or doubtful debts shall comprise charges for amounts written off and for provisions made in respect of loans and advances shown under balance sheet Assets items 3 and 4.

• (8) Provisions: Provisions for contingent liabilities and commitments (Format 1, item 11 (b); Format 2, item A7 (b))

This item shall comprise charges for provisions for contingent liabilities and commitments of a type which would, if not provided for, be shown under off-balance sheet items 1 and 2.

• (9) Adjustments to provisions: Adjustments to provisions for bad and doubtful debts (Format 1, item 12 (a); Format 2, item B5 (a))

This item shall include credits from the recovery of loans that have been written off, from other advances written back following earlier write offs and from the reduction of provisions previously made with respect to loans and advances.

• (10) Adjustments to provisions: Adjustments to provisions for contingent liabilities and commitments (Format 1, item 12 (b); Format 2, item B5 (b))

This item comprises credits from the reduction of provisions previously made with respect to contingent liabilities and commitments.

• (11) Amounts written off fixed assets investments (Format 12, item 13; Format 2, item A8)

Amounts written off fixed assets investments shall comprise amounts written off in respect of assets which are transferable securities held as financial fixed assets, participating interests and shares in group undertakings and which are included in Assets items 5 to 8 in the balance sheet format.

• (12) Adjustments to amounts written off fixed asset investments (Format 1, item 14; Format 2, item B6)

Adjustments to amounts written off fixed assets investments shall include amounts written back following earlier write offs and provisions in respect of assets which are transferable securities held as financial fixed assets, participating interests and group undertakings and which are included in Assets items 5 to 8 in the balance sheet format.

CHAPTER II ACCOUNTING PRINCIPLES AND RULES

SECTION A

ACCOUNTING PRINCIPLES

ACCOUNTING PRINCIPLES

( a ) only profits realised at the balance sheet date shall be included in the profit and loss account; and

( b ) all liabilities and losses which have arisen or are likely to arise in respect of the financial year to which the accounts relate or a previous financial year shall be taken into account, including those which only become apparent between the balance sheet date and the date on which it is signed on behalf of the board of directors in pursuance of section 156 of the Principal Act.

DEPARTURE FROM THE ACCOUNTING PRINCIPLES

SECTION B

VALUATION RULES

HISTORICAL COST ACCOUNTING RULES

PRELIMINARY

FIXED ASSETS

General Rules

( a ) its cost, or

( b ) where it is estimated that any such asset will have a residual value at the end of the period of its useful economic life, its cost less that estimated residual value,

shall be reduced by provisions for depreciation calculated to write off that amount systematically over the period of the asset's useful economic life.

26.—(1) Where a fixed asset investment of a description falling to be included under Assets items 7 (participating interests) or 8 (shares in group undertakings) in the balance sheet format, or any other holding of securities held as a financial fixed asset, has diminished in value, provisions for diminution in value may be made in respect of it and the amount to be included in respect of it may be reduced accordingly; and any such provisions which are not shown separately in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.

• (2) Provisions for diminution in value shall be made in respect of any fixed asset which has diminished in value if the reduction of its value is expected to be permanent (whether it's useful economic life is limited or not), and the amount to be included in respect of it shall be reduced accordingly; and any such provisions which are not shown separately in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.

• (3) Where the reasons for which any provision was made in accordance with subparagraph (1) or (2) have ceased to apply to any extent, that provision shall be written back to the the extent that it is no longer necessary; and any amounts written back in accordance with this subparagraph which are not shown separately in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the accounts.

Development Costs

27.—(1) Notwithstanding that amounts representing "development costs" may be included under Assets item 9 in the balance sheet format, an amount may only be included in a company's balance sheet in respect of development costs in special circumstances.

• (2) If any amount is included in a company's balance sheet in respect of development costs the following information shall be given in a note to the accounts—

( a ) the period over which the amount of those costs originally capitalised is being or is to be written off; and

( b ) the reasons for capitalising the development costs in question.

Goodwill

28.—(1) The application of paragraphs 24 to 26 in relation to goodwill (in any case where goodwill is treated as an asset) is subject to the following provisions of this paragraph.

• (2) Subject to subparagraph (3) below the amount of the consideration for any goodwill acquired by a company shall be reduced by provisions for depreciation calculated to write off that amount systematically over a period chosen by the directors of the company.

• (3) The period chosen shall not exceed the useful economic life of the goodwill in question.

• (3) In any case where any goodwill acquired by a company is included as an asset in the company's balance sheet the period chosen for writing off the consideration for that goodwill and the reasons for choosing that period shall be disclosed in note to the accounts.

Intangible and tangible fixed assets

Other fixed assets

Financial fixed assets

31.—(1) Debts securities, including fixed income securities, held as financial fixed assets shall be included in the balance sheet at an amount equal to their maturity value plus any premium, or less any discount, on their purchase, subject to the following provisions of this paragraph.

• (2) The amount included in the balance sheet with respect to such securities purchased at a premium shall be reduced each financial year on a systematic basis, in accordance with best accounting practices, so as to write the premium off over the period to the maturity date of the security and the amounts so written off shall be charged to the profit and loss account for the relevant financial years.

• (3) The amount included in the balance sheet with respect to such securities purchased at a discount shall be increased each financial year on a systematic basis, in accordance with best accounting practices, so as to extinguish the discount over the period to the maturity date of the security and the amounts by which the amount is increased shall be credited to the profit and loss account for the relevant years.

• (4) The notes to the accounts shall disclose the amount of any unamortised premium or discount not extinguished which is included in the balance sheet by virtue of subparagraph (1).

• (5) For the purposes of this paragraph "premium" means any excess of the amount paid for a security over its maturity value.

CURRENT ASSETS

33.—(1) If the net realisable value of any asset referred to in paragraph 32 is lower than its cost the amount to be included in respect of that asset shall be the net realisable value.

• (2) Where the reasons for which any provision for diminution in value was made in accordance with sub-paragraph (1) have ceased to apply to an extent that provision shall be written back to the extent that it is no longer necessary.

34.—(1) Subject to paragraph 33 above, the amount to be included in the balance sheet in respect of transferable securities not held as financial fixed assets may be the higher of their cost or their market value at the balance sheet date.

• (2) The difference between the cost of any securities included in the balance sheet at a valuation under subparagraph (1) and their value shall be shown (in aggregate) in the notes to the accounts.

MISCELLANEOUS AND SUPPLEMENTARY PROVISIONS

Excess of money owed over value received as an asset item

35.—(1) Where the amount repayable on any debt owed by a company is greater than the value of the consideration received in the transaction giving rise to the debt, the amount of the difference may be treated as an asset.

• (2) Where any such amount is so treated:

( a ) it shall be written off by reasonable amounts each year and must be completely written off before repayment of the debt; and

( b ) If the current amount is not shown as a separate item in the company's balance sheet it must be disclosed in a note to the accounts.

Determination of cost

36.—(1) The cost of an asset that has been acquired by the company shall be determined by adding to the actual price paid any expenses incidental to its acquisition.

• (2) The cost of an asset constructed by the company shall be determined by adding to the purchase price of the raw materials and consumables used the amount of the costs incurred by the company which are directly attributable to the construction of that asset.

• (3) In addition, there may be included in the cost of an asset constructed by the company:

( a ) a reasonable proportion of the costs incurred by the company which are only directly attributable to the construction of that asset, but only to the extent that they relate to the period of construction; and

( b ) interest on capital borrowed to finance the construction of that asset, to the extent that it accrues in respect of the period of construction;

provided, however, in a case within subparagraph (b) above, that the inclusion of the interest in determining the cost of that asset and the amount of the interest so included is disclosed in a note to the accounts.

37.—(1) Subject to the qualification mentioned below, the cost of any assets which are fungible assets (including investments) may be determined by the application of any of the methods mentioned in subparagraph (2) below in relation to any such assets of the same class.

The method chosen must be one which appears to the directors to be appropriate in the circumstances of the company.

• (2) Those methods are:

( a ) the method known as "first in, first out" (FIFO);

( b ) a weighted average price; and

( c ) any other method similar to any of the methods mentioned above.

• (3) Where in the case of any company:

( a ) the cost of assets falling to be included under any item shown in the company's balance sheet has been determined by the application of any method permitted by this paragraph; and

( b ) the amount shown in respect of that item differs materially from the relevant alternative amount given below in this paragraph;

the amount of that difference shall be disclosed in a note to the accounts.