S.I. No. 266/2015 - European Union (Credit Institutions: Financial Statements) Regulations 2015

Notice of the making of this Statutory Instrument was published in

“Iris Oifigiúil” of 26th June, 2015.

I, MICHAEL NOONAN, 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 Directive 86/635/EEC of 8 December 1986¹ and Council Directive 89/117/EEC of 13 February 1989² , hereby make the following regulations:

Citation and commencement

1.

• (2) These Regulations come into operation on 24 June 2015.

Interpretation

2.

“Bank” means the Central Bank of Ireland;

“company” means a credit institution;

“credit institution” has the same meaning as it has in section 275 of the Principal Act;

“Directive” means Council Directive 86/635/EEC of 8 December 1986;

“Principal Act” means the Companies Act 2014 (No.38 of 2014);

“small or medium company” shall be construed in accordance with section 350 of the Principal Act.

• (2) A word or expression that is used in these Regulations and is also used in the Principal Act, and, in particular, in Part 6 of that Act, shall have in these Regulations the same meaning as it has in that Act (or Part) unless the contrary intention appears.

Application of Part 6 of Principal Act to credit institutions

3.

• (2) A reference in the Principal Act to any provision of Part 6 of that Act shall be construed, for the purposes of its application to a credit institution, as a reference to that provision as applied by these Regulations.

• (3) A reference in Part 6 of the Principal Act to Schedule 3 to that Act shall be construed, for the purposes of its application to a credit institution, as a reference to Schedule 1 to these Regulations.

• (4) A reference in Part 6 of the Principal Act to Schedule 4 to that Act shall be construed, for the purposes of its application to a credit institution, as a reference to Schedule 2 to these Regulations.

Exceptions to disclosure by credit institution under sections 307 to 309 in the case of connected persons and certain officers

4.

Credit institution holding companies

5.

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

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

• (2) In paragraph (1)—

• (a) the reference to the management of interests in subsidiaries includes a reference to the provision of services to subsidiaries; and

• (b) “principalsubsidiaries”, in relation to a holding company, means those subsidiaries of the company whose results or financial position would principally affect the figures shown in the group financial statements.

Financial statements to be made available to public

6.

• (a) publish its financial statements prepared in accordance with section 290 or 293 of the Principal Act, and

• (b) make available to the public copies of its financial statements on request at a price which does not exceed the cost of making the copy.

• (2) A person who contravenes paragraph (1) shall be guilty of an offence and shall be liable on summary conviction to a class A fine or imprisonment for a term not exceeding 6 months or both.

Publication of financial statements of credit institutions incorporated outside State

7.

• (a) the financial statements prepared by it that are equivalent to entity financial statements prepared by a company under the Principal Act, and

• (b) the financial statements (if any) prepared by it that are equivalent to group financial statements prepared by a company under the Principal Act,

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 paragraph (1), the Bank shall apply the provisions of Directive 89/117/EEC of 13 February 1989 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.

• (5) A person who contravenes this Regulation shall be guilty of an offence and shall be liable on summary conviction to a class A fine or imprisonment for a term not exceeding 6 months or both.

Non-application of certain provisions of Principal Act to credit institutions

8.

• (2) In addition to what is provided by paragraph (1) each provision of the Principal Act specified in the Table to this Regulation, in so far as it is not already disapplied by that Act to such an institution, shall not apply to a credit institution.

• (3) Section 357 of the Principal Act shall not apply to a credit institution.

Table

Sections 297 and 298 (Exemption from consolidation: size of group)
Sections 358 to 364 (Audit exemption)
Section 365 (Dormant company audit exemption)
Section 377 (Small and medium sized companies)
Section 378 (Application of this Chapter in cases where audit exemption available, etc.)

Amendment of Central Bank Act 1942

9.

“

58	S.I. No. 266 of 2015	European Union (Credit Institutions: Financial Statements) Regulations 2015	The whole instrument

.”.

Revocation of European Communities (Credit Institutions:Accounts) Regulations 1992

10.

SCHEDULE 1 ACCOUNTING PRINCIPLES, FORM AND CONTENT OF ENTITY FINANCIAL STATEMENTS

PART I CONSTRUCTION OF REFERENCES TO PROVISIONS OF THIS SCHEDULE

• (a) a reference in this Schedule to a paragraph or Part is a reference to a paragraph or Part of this Schedule, unless it is indicated that a reference to some other enactment is intended;

• (b) a reference in this Schedule to a section is a reference to the section of the Part in which the reference occurs, unless it is indicated that a reference to some other enactment is intended; and

• (c) a reference in this Schedule to a subparagraph or clause is a reference to the subparagraph or clause of the provision in which the reference occurs, unless it is indicated that a reference to some other enactment is intended.

• (2) Provisions providing for the interpretation of certain expressions appearing in this Schedule are contained in Part VI.

PART II GENERAL RULES AND FORMATS

SECTION A

GENERAL RULES

• (a) every balance sheet of a company shall show the items listed in the balance sheet formats set out in Section B; and

• (b) every profit and loss account of a company shall show the items listed in any one of the profit and loss accounts 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) shall not be read as requiring the heading or sub-heading for any item in the balance sheet, or profit and loss account, of a company to be distinguished by any letter or number assigned to that item in the formats set out in Section B.

• (2) Where any change is made in the format adopted in preparing a balance sheet or profit and loss account of a company, the reasons for the change, together with full particulars of the change, shall be given in a note to the financial statements in which the new format is first adopted.

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

• (a) preliminary expenses;

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

• (c) costs of research; and

• (d) own shares or treasury shares.

• (3) Any items to which lower case letters are assigned in any of the formats set out in Section B may be combined in the financial statements of a company—

• (a) in any case where the individual amounts of such items are not material to assessing the financial position or profit or loss of the company for the financial year concerned, or

• (b) in any case where the combination of such items facilitates that assessment.

• (4) Where items are combined in a company’s financial statements pursuant to subparagraph (3)(b), the individual amounts of any items so combined shall be disclosed in a note to the financial statements.

(2)Subparagraph (1) shall 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 the format adopted as aforesaid.

• (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).

• (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.

SECTION B

THE REQUIRED FORMATS FOR FINANCIAL STATEMENTS

Preliminary

• (a) the heading of each note gives the required heading or sub-heading for the item to which it applies and a reference to any letters and numbers assigned to that item in the formats set out in this Part; and

• (b) references to a numbered format are references to the balance sheet format or (as the case may require) to the profit and loss account format of that number set out in this Part.

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) Savings deposits

• (b) Other debts

• (ba) Repayable on demand

• (bb) 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) Other undenominated capital

• (b) Reserve for own shares held (14)

• (c) Reserves provided for by the constitution

• (d) Other reserves (Specify as necessary)

Total Liabilities

Off-Balance Sheet Items

• (1) Acceptances and endorsements

• (2) Guarantees and assets pledged as collateral security (16)

• (3) Other contingent liabilities

• (1) Commitments arising out of sale and option to resell transactions (18)

• (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 credit institutions (Assets item 3)

Loans and advances to credit institutions 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.

For the purposes of this Asset item, credit institutions shall comprise all undertakings on the list published by the EBA on its website pursuant to Article 20 of the Capital Requirements Directive, as well as central banks and official domestic and international banking organisations and all private and public undertakings which are not established in the Community but which satisfy the definition in Article 3(1) of the Capital Requirements Directive.

Loans and advances to undertakings which do not satisfy the above conditions shall be shown under Assets item 4.

• (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, within the meaning of Assets item 3. 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, trademarks 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 separately disclosed, in a note to the financial statements, the amount of any development costs or 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 financial statements the amount included in this item with respect to land and buildings occupied by the company for its own activities.

• (9) Deposits by credit institutions (Liabilities item 1)

Deposits by credit institutions 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.

For the purposes of this Asset item, credit institutions shall comprise all undertakings on the list published by the EBA on its website pursuant to Article 20 of the Capital Requirements Directive, as well as central banks and official domestic and international banking organisations and all private and public undertakings which are not established in the Community but which satisfy the definition in Article 3(1) of the Capital Requirements Directive.

• (10) Customer accounts (Liabilities item 2)

This item shall comprise all amounts owed to creditors that are not credit institutions, within the meaning of Liabilities item 1. 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.

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

This item shall include both debt securities and debts for which transferable certificates have been issued, in particular deposit receipts, “bons de caisse” and 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).

• (12) 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.

• (13) Subscribed and called up share capital (Liabilities item 8)

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

Subscribed capital shall comprise all amounts which, in accordance with the legal structure of an insurance undertaking, are regarded, in accordance with the Principal Act as equity share capital subscribed by the shareholders or other proprietors.

Called-up capital shall comprise all amounts which, in accordance with the legal structure of an insurance undertaking, are regarded, in accordance with the Principal Act as equity share capital subscribed and fully paid up or subscribed and partly paid up, to the extent paid up.

• (14) Reserve for own Shares (Liabilities item 10(b))

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

• (15) 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 rediscounted bills shall be included in this item. Acceptances other than own acceptance shall also be included.

• (16) 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 behalf of third parties, particularly in respect of sureties and irrevocable letters of credit.

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

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

• (18) 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.

SPECIAL RULES

Claims on, and liabilities to, undertakings in which a participating interest is held or group undertakings

• (2) 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, with which a company is linked by virtue of a participating interest, included therein.

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

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

• (b) liabilities to undertakings, with which a company is linked by virtue of a participating interest, included therein.

Subordinated assets

• (2) In the case of Assets items 2 to 5 in the balance sheet format, the amounts required to be shown by paragraph 13(2) 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

• (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

• (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 financial statements.

• (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

• (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

• (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 companys balance sheet, with the notes to the financial statements 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 (8).

• (b) Provisions for contingent liabilities and commitments (9).

• (a) Adjustments to provisions for bad and doubtful debts (10).

• (b) Adjustments to provisions for contingent liabilities and commitments (11).

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 (8).

• (b) Provisions for contingent liabilities and commitments (9).

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 (10).

• (b) Adjustments to provisions for contingent liabilities and commitments (11).

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. Such income shall also include income arising from the spreading on a time basis of the discount or premium on assets acquired at an amount below or above, the sum payable at maturity;

• (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. Such charges shall also include charges arising from the spreading on a time basis of liabilities contracted at an amount above or below, the sum payable at maturity;

• (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) Dividend income (Format 1, item 3; Format 2, item B2)

This item shall comprise all dividends and other income from variable-yield securities, from participating interests and from shares in group undertakings. Income from shares in investment companies shall also be included under this item.

• (4) 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 on behalf of third parties;

• 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 on behalf of third parties; and

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

• (5) 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 on behalf of third parties;

• 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 on behalf of third parties; and

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

• (6) 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 38 (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.

• (7) 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.

• (8) 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.

• (9) 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.

• (10) 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.

• (11) 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.

• (12) Amounts written off fixed assets investments (Format 1, 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.

• (13) 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.

PART III ACCOUNTING PRINCIPLES AND VALUATION RULES

SECTION A

ACCOUNTING PRINCIPLES

Preliminary

Accounting principles

• (a) only profits realised at the financial year end date shall be included in the profit and loss account; and

• (b) all liabilities which have arisen in the course of the financial year to which the financial statements relate or of a previous financial year shall be taken into account, even if such liabilities only become apparent between the financial year end date and the date on which the financial statements are signed under section 324 of the Principal Act.

Departure from accounting principles

SECTION B

HISTORICAL COST ACCOUNTING RULES

Preliminary

FIXED ASSETS

General rules

Rules for depreciation and diminution in value

• (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.

• (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 its 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 financial statements.

• (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 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 financial statements.

Development costs

• (2) If an 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 financial statements—

• (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 costs in question.

Goodwill

• (2) Subject to subparagraph (3), 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.

• (4) In any case where any goodwill acquired by a company is shown or 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 a note to the financial statements.

Intangible and tangible fixed assets

Other fixed assets

Financial fixed assets

• (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 financial statements 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

• (2) Where the reasons for which any provision for diminution in value was made under subparagraph (1) have ceased to apply to any extent, that provision shall be written back to the extent that it is no longer necessary.

• (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 financial statements.

MISCELLANEOUS

Excess of money owed over value received as an asset item

• (2) Where any such amount exists—

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

• (b) if the amount not written off is not shown as a separate item in the company’s balance sheet, it shall be disclosed in a note to the financial statements.

DETERMINATION OF COST

• (2) The cost of an asset constructed by a credit institution 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 a credit institution—

• (a) a reasonable proportion of the costs incurred by the credit institution which are only indirectly 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 clause (b), 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 financial statements.

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 financial statements.

• (4) Subject to subparagraph (5), for the purposes of subparagraph (3)(b), the relevant alternative amount, in relation to any item shown in a company’s balance sheet, is the amount which would have been shown in respect of that item if assets of any class included under that item at an amount determined by any method permitted by this paragraph had instead been included at their replacement cost as at the financial year end date.

• (5) The relevant alternative amount may be determined by reference to the most recent actual purchase price before the financial year end date of assets of any class included under the item in question instead of by reference to their replacement cost as at that date, but only if the former appears to the directors of the company to constitute the more appropriate approach in the case of assets of that class.

SUBSTITUTION OF ORIGINAL STATED AMOUNT WHERE PRICE OR COST

UNKNOWN

SECTION C

ALTERNATIVE ACCOUNTING RULES

Preliminary

• (2) Those rules, with the omission of paragraphs 27, 32 to 34 and 40 to 42, are referred to subsequently in this Part as the depreciation rules; and references subsequently in this Schedule to the historical cost accounting rules do not include the depreciation rules as they apply by virtue of paragraph 46.

Alternative accounting rules

• (2) Tangible fixed assets may be included at a market value determined as at the date of their last valuation or at their current cost.

• (3) Investments of any description falling to be included under Assets items 7 (Participating interests) or 8 (Shares in group undertakings) of the balance sheet format and any other securities held as financial fixed assets may be included:

• (a) at a market value determined as at the date of their last valuation,

• (b) at a value determined on any basis which appears to the directors to be appropriate in the circumstances of the company, or

• (c) at a fair value determined in accordance with Section D,

but in the case of clauses (b) or (c) particulars of the method of valuation adopted and of the reasons for adopting it shall be disclosed in a note to the financial statements.

• (4) Securities of any description not held as financial fixed assets (if not valued in accordance with paragraph 38 above) may be included at their current cost.

Application of depreciation rules

• (2) The amount of any provision for depreciation required in the case of any fixed asset by paragraph 29 or 30 as it applies by virtue of subparagraph (1) is referred to subsequently in this paragraph as the “adjusted amount”; and the amount of any provision which would be required by that paragraph in the case of that asset according to the historical cost accounting rules is referred to as the “historical cost amount”.

• (3) Where subparagraph (1) applies in the case of any fixed asset, the amount of any provision for depreciation in respect of that asset included in any item shown in the profit and loss account in respect of amounts written off assets of the description in question may be the historical cost amount instead of the adjusted amount, provided that, if the amount of the provision for depreciation is the historical cost amount, the amount of any difference between the two shall be shown separately in the profit and loss account or in a note to the financial statements.

Additional information in case of departure from historical cost accounting rules

• (2) The items affected and the basis of valuation adopted in determining the amounts of the assets in question in the case of each such item shall be disclosed in a note to the financial statements.

• (3) In the case of each balance sheet item affected either—

• (a) the comparable amounts determined according to the historical cost accounting rules; or

• (b) the differences between those amounts and the corresponding amounts actually shown in the balance sheet in respect of that item,

shall be shown separately in the balance sheet or in a note to the financial statements.

• (4) In subparagraph (3), references in relation to any item to the comparable amounts determined as there mentioned are references to—

• (a) the aggregate amount which would be required to be shown in respect of that item if the amounts to be included in respect of all the assets covered by that item were determined according to the historical cost accounting rules; and

• (b) the aggregate amount of the cumulative provisions for depreciation or diminution in value which would be permitted or required in determining those amounts according to those rules.

Revaluation Reserve

• (2) The amount of the revaluation reserve shall be shown in the company’s balance sheet under a separate sub-heading in the position given for the item “revaluation reserve” in the balance sheet format set out in Section B of Part II of this Schedule.

• (3) An amount may be transferred—

• (a) from the revaluation reserve—

• (i) to the profit and loss account, if the amount was previously charged to that account, or it represents realised profit, or

• (ii) on capitalisation;

• (b) to or from the revaluation reserve in respect of the taxation relating to any profit or loss credited or debited to the reserve;

and the revaluation reserve shall be reduced to the extent that the amounts transferred to it are no longer necessary for the purpose of the valuation methods used.

• (4) In subparagraph (3)(a)(ii) “capitalisation”, in relation to an amount standing to the credit of the revaluation reserve, means applying it in wholly or partly paid up unissued shares in the company to be allotted to members of the company as fully or partly paid shares.

• (5) The revaluation reserve shall not be reduced except as mentioned in this paragraph.

• (6) The treatment for taxation purposes of amounts credited or debited to the revaluation reserve shall be disclosed in a note to the financial statements.

Assets and Liabilities Denominated in Foreign Currencies.

• (2) An appropriate rate of exchange prevailing on the date of purchase may however be used for assets held as financial fixed assets and assets to be included under Assets items 9 (Intangible fixed assets) and 10 (Tangible fixed assets) in the balance sheet format, if they are not covered or not specifically covered in either the spot or forward currency markets.

• (3) An appropriate spot rate of exchange prevailing at the balance sheet date shall be used for translating uncompleted spot exchange transactions.

• (4) An appropriate forward rate of exchange prevailing at the balance sheet date shall be used for translating uncompleted forward exchange transactions.

• (5) This paragraph does not apply to any assets or liabilities held, or any transactions entered into, for hedging purposes or to any assets or liabilities which are themselves hedged.

• (2) In the case, however, of assets held as financial fixed assets, of assets to be included under Assets items 9 (Intangible fixed assets) and 10 (Tangible fixed assets) in the balance sheet format and of transactions undertaken to cover such assets, any such difference may be deducted from or credited to any non-distributable reserve available for the purpose.

SECTION D

FAIR VALUE ACCOUNTING RULES

Inclusion of financial instruments at fair value

• (2) Subject to paragraph 54, subparagraph (1) does not apply to financial instruments which constitute liabilities unless—

• (a) they are held as part of a trading portfolio; or

• (b) they are derivative financial instruments.

(3)Subparagraph (1) does not apply to—

• (a) financial instruments (other than derivative financial instruments) held to maturity;

• (b) loans and receivables originated by the company and not held for trading purposes;

• (c) interests in subsidiary undertakings, associated undertakings and joint ventures;

• (d) equity instruments issued by the company;

• (e) contracts for contingent consideration in a business combination; and

• (f) other financial instruments with such special characteristics that the instruments, according to generally accepted accounting principles or practice, should be accounted for differently from other financial instruments.

• (4) If the fair value of a financial instrument cannot be determined reliably by any of the methods described in paragraph 53, subparagraph (1) does not apply to that financial instrument and it shall be measured using the accounting rules set out in Section B or C.

• (5) In this paragraph—

“associated undertaking” has the meaning given to it by paragraph 27 of Schedule 2;

“joint venture” has the meaning given to it by paragraph 26 of Schedule 2.

• (a) they are accounted for in accordance with international accounting standards as adopted by the Commission Regulation on or before 5 September 2006; and

• (b) the associated disclosure requirements, provided for in international financial reporting standards, are made.

• (2) Financial instruments referred to in paragraph 51(3) may be accounted for by a company at fair value if—

• (a) they are accounted for in accordance with international accounting standards as adopted by the Commission Regulation, on or before 5 September 2006; and

• (b) the associated disclosure requirements, provided for in international financial reporting standards, are made.

• (3) In this paragraph “Commission Regulation” means Commission Regulation (EC) No. 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council³ .

Methods for determining fair value

• (2) If a reliable market can readily be identified for the financial instrument, its fair value is to be determined by reference to its market value.

• (3) If a reliable market cannot readily be identified for the financial instrument but can be identified for its components or for a similar instrument, its fair value is to be determined by reference to the market value of its components or of the similar instrument.

• (4) If neither subparagraph (2) nor (3) applies, the fair value of the financial instrument is to be a value resulting from generally accepted valuation models and techniques.

• (5) Any valuation models and techniques used for the purposes of subparagraph (4) shall ensure a reasonable approximation of the market value.

Inclusion of hedged items at fair value

Other assets that may be included at fair value

• (a) investment property; and

• (b) living animals and plants;

that, under relevant international financial reporting standards, may be included in financial statements at fair value.

• (2) Such investment property and such living animals and plants may be included at fair value, provided that all such investment property or, as the case may be, all such living animals and plants are so included where their fair value can reliably be determined.

• (3) In this paragraph, “fair value” means fair value determined in accordance with relevant international financial reporting standards.

Accounting for changes in fair value of financial instruments

• (2) Notwithstanding paragraph 22, but subject to subparagraphs (3) and (4), a change in the fair value of the financial instrument or of the investment property or living animal or plant shall be included in the profit and loss account.

• (3) Where—

• (a) the financial instrument accounted for is a hedging instrument under a system of hedge accounting that allows some or all of the change in value not to be shown in the profit and loss account; or

• (b) the change in value relates to an exchange difference arising on a monetary item that forms part of a company’s net investment in a foreign entity;

the amount of the change in value shall be credited or (as the case may be) debited to a separate reserve to be known as the “fair value reserve”.

• (4) Where the instrument accounted for—

• (a) is an available for sale financial asset; and

• (b) is not a derivative;

the change in value may be credited or (as the case may be) debited to the fair value reserve.

The fair value reserve

• (a) from the fair value reserve to the profit and loss account if the related asset is impaired, transferred or disposed of; or

• (b) from the fair value reserve in respect of tax relating to any amount transferred under clause (a).

• (2) The fair value reserve shall be adjusted when amounts therein are no longer necessary for the purposes of paragraph 56(3) or (4).

• (3) The fair value reserve shall not be reduced except as provided for in this paragraph.

• (4) The treatment for taxation purposes of amounts credited or debited to the fair value reserve shall be disclosed in a note to the financial statements.

PART IV INFORMATION REQUIRED BY WAY OF NOTES TO FINANCIAL STATEMENTS

Preliminary

Information supplementing the balance sheet

Debentures

• (a) the reason for making the issue,

• (b) the classes of debentures issued, and

• (c) as respects each class of debentures, the amount issued and the consideration received by the company for the issue.

• (2) Particulars of any redeemed debentures which the company has power to reissue shall also be given.