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The Building Societies (Accounts and Related Provisions) Regulations 1992

Type Statutory-Instrument

Publication 1992-02-17

State In force

Department Queen's Printer of Acts of Parliament

Source legislation.gov.uk

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Made: 17th February 1992

Laid before Parliament: 6th March 1992

Coming into force: 1st January 1993

The Building Societies Commission, with the consent of the Treasury, in exercise of the powers conferred on it by sections 73, 74(3) and (6), 75(1) and 76(3) of the Building Societies Act 1986[^f00001], and of all other powers enabling it in that behalf, hereby makes the following Regulations:

Citation and commencement

1

These Regulations may be cited as the Building Societies (Accounts and Related Provisions) Regulations 1992 and shall come into force on 1st January 1993

Interpretation

2

(1) In these Regulations—

“the Act” means the Building Societies Act 1986;

“associated body” shall be taken as including bodies corporate given such a meaning by section 18 of the Act together with all bodies corporate in which such associated bodies hold shares or membership rights;

“associated undertaking” has the meaning given to that phrase by paragraph 20 of Schedule 4A to the Companies Act 1985[^f00002];

“group” means a society and its subsidiary undertakings;

“group accounts society” means a society the directors of which are obliged by section 72 of the Act (duty of directors to prepare annual accounts) to prepare group accounts;

“particular account” means an income and expenditure account, a balance sheet, or a statement of the source and application of funds;

“subsidiary undertaking” means a subsidiary undertaking of a group accounts society with which the group accounts of the society are required by section 72 of the Act[^f00003] to deal;

“single accounts society” means a society which is not a group accounts society; and “society” means a building society.

(2) Nothing in these Regulations shall be taken to imply that the carrying on by a society of any activity provision for the recording of which is contained in these Regulations is, by virtue of that provision, within the powers of that society.

Annual accounts

3

(1) In respect of the annual accounts of any single accounts society—

(a) every income and expenditure account shall be prepared in the format set out in Part I of Schedule 1,

(b) every balance sheet shall be prepared in the format set out in Part I of Schedule 2, and

(c) every statement of the source and application of funds shall be prepared in the format set out in Part I of Schedule 3,

in each case in accordance with the relevant provisions, and every such document shall, subject to the following paragraphs of this regulation, be prepared in the order and under the headings and subheadings in the format applicable to it.

(2) In respect of the annual accounts of any group accounts society—

(a) the provisions of this regulation shall apply subject to the provisions of Regulation 4, the supplementary provisions of which shall also have effect in relation to those accounts, and

(b) within those accounts—

(i) every income and expenditure account relating to the society shall be prepared in the format set out in Part I of Schedule 1,

(ii) every income and expenditure account relating to the society and its subsidiary undertakings shall be prepared on a consolidated basis in the format set out in Part II of Schedule 1,

(iii) every balance sheet relating to the society shall be prepared in the format set out in Part I of Schedule 2,

(iv) every balance sheet relating to the society and its subsidiary undertakings shall be prepared on a consolidated basis in the format set out in Part II of Schedule 2, and

(v) every statement of the source and application of funds of the society and its subsidiary undertakings shall be prepared on a consolidated basis in the format set out in Part II of Schedule 3, and if such a statement is also prepared in relation to the society alone, that further statement shall be prepared in the format set out in Part I thereof,

and in each case in accordance with the relevant provisions, and every such document shall, subject to the following paragraphs of this regulation, be prepared in the order and under the headings and subheadings in the format applicable to it.

(3) Paragraphs (1) and (2) are not to be read as—

(a) requiring the heading or subheading for any item to be distinguished by any letter or number assigned to that item in the format in which it appears, or

(b) prohibiting the showing of any item in a particular account in greater detail (with or without additional subdivisions) than is required by the format for that particular account, or

(c) prohibiting the insertion of additional items, provided that their contents are not specifically covered by any of the items prescribed in the formats.

(4) Items preceded by a lower case letter or by a Roman numeral in any format set out in Schedules 1, 2 or 3 may be combined in a society’s annual accounts for any financial year if either:

(a) their individual amounts are not material to assessing—

(i) in respect of an income and expenditure account, the income and expenditure of the society (or, as the case may be, the society and its subsidiary undertakings) for that year, and

(ii) in respect of a balance sheet, the state of affairs of the society (or, as the case may be, the society and its subsidiary undertakings) as at the end of that year, and

(iii) in respect of a statement of the source and application of funds, the manner in which the business of the society (or, as the case may be, the society and its subsidiary undertakings) has been financed and in which its (or their) financial resources have been used during that year, or

(b) their combination facilitates that assessment,

but where subparagraph (b) applies, the individual amounts of any items so combined shall be disclosed in a note to the annual accounts.

(5) Subject to paragraph (6), a heading or subheading for an item contained in any format set out in Schedules 1, 2 or 3 shall not be included if there is no amount to be shown for that item in respect of the financial year to which the annual accounts relate (and a total need not be included if, as a result of this paragraph, it would be composed of a single item).

(6) For the purpose of comparing particular accounts with those for the preceding financial year—

(a) in respect of every item shown in a balance sheet, income and expenditure account and statement of the source and application of funds, the correspond ing amount for the preceding financial year shall be shown,

(b) where that 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 annual accounts relate, the former amount shall be adjusted and particulars of the adjustment and the reasons for it shall be disclosed in a note to the annual accounts, and

(c) paragraph (5) does not apply in any case where an amount can be shown for the item to which the heading or subheading relates in respect of the preceding financial year; in such a case that amount shall be shown under the heading or subheading required for that item.

(7) In this regulation, “the relevant provisions” means, in relation to any particular account, Part III of the Schedule in question, Parts I and II of which contain formats of that particular account.

Group accounts-supplementary provisions

4

(1) The annual accounts of a group accounts society shall comply with the further provisions of Schedule 4 as to the form and content of the consolidated income and expenditure account, the balance sheet, the statement of the source and application of funds and the additional information to be provided by way of notes to the accounts.

(2) Subject to the exceptions authorised or required by this regulation, all the subsidiary undertakings of the society shall be included in the consolidated income and expenditure account, the balance sheet and the statement of the source and application of funds, as required by Regulation 3(2), and in the notes to the accounts in respect of the society and its subsidiary undertakings in combination, as required by Regulation 5(2)(b).

(3) A subsidiary undertaking may be excluded from the requirements of paragraph (2) if compliance with those requirements is not material for the purpose of giving a true and fair view for the society and its subsidiary undertakings as a whole, of the matters set out in subsections (2), (3) and (4) of section 73 of the Act.

(4) If a society has two or more subsidiary undertakings, they do not qualify under paragraph (3) for exclusion from the requirements of paragraph (2) if taken as a whole they are material for the purpose enumerated in paragraph (3).

(5) A subsidiary undertaking may also be excluded from the requirements of paragraph (2) where—

(a) severe long-term restrictions substantially hinder the exercise by the society of its rights over the assets or management of the subsidiary undertaking;

(b) the information necessary for the preparation of group accounts cannot be obtained without disproportionate expense or undue delay; or

(c) the interest of the society is held exclusively with a view to subsequent resale and the subsidiary undertaking has not been previously included in the group accounts prepared by the society.

(6) The references in subparagraphs (a) and (c) of paragraph (5) to the rights of the society and to the interest of the society are, respectively to rights and interests held by or attributed to the society for the purposes of section 258 of the Companies Act 1985^f00004 as applied to building societies by The Building Societies Act 1986 (Modifications) Order 1991[^f00005] in the absence of which it would not be the parent body.

(7) A subsidiary undertaking shall be excluded from the requirements of paragraph (2) where its activities are so different from those of the society or other subsidiary undertakings included in the group accounts that its inclusion would be incompatible with the obligation to give a true and fair view of the matters referred to in paragraph (3); provided that an undertaking shall not be excluded under this paragraph from the requirements of paragraph (2) if its activities are a direct extension of, or of services ancillary to, banking business of the society; and for the purposes of this paragraph, “banking business” mean the carrying on of a deposit taking business within the meaning of the Banking Act 1987[^f00006].

(8) Each particular account which is a group account shall combine the information contained in the particular account of the society and the accounts of its subsidiary undertakings from which it is derived, adjusted so far as is necessary to consolidate those accounts.

(9) In the group accounts, the interest of the society or of any subsidiary undertaking in an associated undertaking, and the amount of income or expenditure attributable to such an interest, shall be shown by the equity method of accounting (which shall include dealing with any goodwill arising in accordance with paragraphs 8 to 10 and 12 of Schedule 7).

(10) Where an associated undertaking is itself a parent undertaking, the net assets and income or expenditure required to be taken into account by paragraph (9) are those of the parent undertaking and its subsidiary undertakings, after making any consolidation adjustments.

(11) For the purposes of paragraph (10), “parent undertaking” and “subsidiary undertaking” have the meanings attributed to those phrases by section 258 of the Companies Act 1985[^f00007].

(12) The equity method of accounting referred to in paragraph (9) need not be applied if the amounts in question are not material for the purpose of giving a true and fair view, for the society and its subsidiary undertakings as a whole, of the matters set out in subsections (2), (3) and (4) of section 73 of the Act.

Notes to annual accounts

5

(1) The annual accounts of any single accounts society shall, subject to paragraph (5), include notes to them containing the material specified in Schedule 5, in addition to the notes required to be included by other provisions of these Regulations.

(2) The annual accounts of any group accounts society shall, subject to paragraph (5) and to any provision in Schedule 5 which indicates otherwise, include notes to them containing—

(a) in respect of the society, and

(b) in respect of the society and those of its subsidiary undertakings not excluded from the requirements of Regulation 4 (2), in combination,

the material specified in Schedule 5 in addition to the notes required to be included by other provisions of these Regulations.

(3) For the purposes of paragraph (2)(b)—

(a) any reference in a relevant provision of Schedule 5 to a society shall be taken as a reference to the society and its subsidiary undertakings in combination, and

(b) each associated body of the society which is not a subsidiary undertaking shall be treated as an associated body of the group.

(4) In paragraph (3) “relevant provision” means, in relation to Schedule 5, a provision thereof other than paragraphs 4 to 14 and 42.

(5) Paragraphs (1) and (2) are not to be read as prohibiting the disclosing of any material in the notes to the annual accounts in greater detail than is required by these Regulations.

Associated Bodies

6

(1) Where a society has held any investments in an associated body during the financial year, the information specified in Schedule 6 shall be given, in addition to that required by Regulation 5, in the notes to the annual accounts.

(2) The information required by paragraph (1) shall comprise

(a) where the society is a single accounts society, or a group accounts society but all its subsidiary undertakings are excluded from the requirements of regulation 4(2), the information specified in Part I of Schedule 6;

(b) where the society is a group accounts society and at least one subsidiary undertaking is included in the group accounts in accordance with the requirements of Regulation 4(2), the information specified in Part II of Schedule 6.

(3) With the exception of that specified in paragraph 5(2) of the Schedule, the information required by Schedule 6 need not be given with respect to an associated body which—

(a) is established under the law of a country outside the United Kingdom, or

(b) carries on its business outside the United Kingdom,

if in the opinion of the directors of the society the disclosure would seriously prejudice the business of that associated body or the business of the society or any of its subsidiary undertakings, and the Commission agrees that the information need not be given.

(4) Where advantage is taken of paragraph (3), that fact shall be stated in a note to the accounts.

(5) If the directors of the society are of the opinion that the number of associated bodies in respect of which the society is required to give information specified in Schedule 6 is such that to do so would result in information of excessive length being given, the information need only be given in respect of—

(a) those associated bodies whose results or financial position, in the opinion of the directors, principally affected the figures shown in the society’s annual accounts, and

(b) subsidiary undertakings excluded from the requirements of Regulation 4(2).

(6) If advantage is taken of paragraph (5), there shall be included in the notes a statement that the information specified in Schedule 6 is given only with respect to such undertakings as are mentioned in that paragraph.

Accounting principles and rules

7

Each society shall prepare its annual accounts in accordance with the accounting principles and rules set out in Schedule 7.

Directors' report

8

Each directors' report of a society prepared under section 75 of the Act shall contain, in addition to the other matters required to be contained in it by the Act, the material specified in Schedule 8.

Annual business statement

9

(1) Each annual business statement of a society prepared under section 74 of the Act shall, subject to paragraphs (2) and (3), contain the material specified in Schedule 9.

(2) Nothing in this regulation—

(a) requires the setting out of the material specified in Schedule 9 in any particular manner, or

(b) prohibits the inclusion, for the purpose of the giving in the annual business statement of a true representation of the matters to which that material relates, of material additional to that required to be included by this Regulation.

(3) Any material required or permitted by this Regulation to be contained in the annual business statement may be included instead in the notes to the annual accounts or in the directors' report and, where any such material is so included, the annual business statement shall specify where in those notes or that report that material is to be found.

(4) The material required to be contained in the annual business statement by virtue of paragraph 3 of Schedule 9 shall not be the subject of report by auditors under section 78 of the Act.

Summary financial statement

10

(1) Subject to paragraph (2), each summary financial statement of a society prepared under section 76 of the Act shall be prepared in the order and under the headings and subheadings shown in the formats (and as directed by the notes) set out in Part I, and in accordance with the provisions of Part II, of Schedule 10, so as to contain—

(a) a statement in the prescribed form for the purposes of section 76(4) of the Act,

(b) a summary directors' report,

(d) a summary of key financial ratios,

followed by the statement of the auditors' opinion required to be included by section 76(5) of the Act, and so as to give a summary account of the relevant matters.

(2) Paragraph (1) is not to be read as—

(a) requiring the heading or subheading for any item to be distinguished by any letter or number assigned to that item in the format in which it appears,

(b) requiring the headings in Section B of Part I of Schedule 10 to contain any particular wording,

(c) prohibiting the inclusion, in place of the words “THIS YEAR” and “LAST YEAR” in Sections C and D of Part I of Schedule 10, of other column headings consistent with paragraph 2 of Part II of that Schedule, or

(d) prohibiting the inclusion, for the purpose of assisting the giving in the summary financial statement of a summary account of the relevant matters, of material additional to that required to be included by this Regulation.

(3) In this regulation “the relevant matters” are, in relation to a financial year of a society with which a summary financial statement deals, the financial development (during the year) and the financial position (at the end of the year) of—

(a) where section 76(2) of the Act does not apply, the society, and

(b) where section 76(2) of the Act applies, the society and its subsidiary undertakings.

Interpretation of Schedules

11

Schedule 11 shall have effect for the interpretation of the Schedules to these Regulations.

Transitional provisions

12

(1) Where any provision of these Regulations requires—

(a) the recording of a particular item for the entirety of a financial year, and—

(i) that financial year began before the coming into force of these Regulations, and

(ii) the legislation in force during the period beginning with the start of the financial year and ending immediately before the coming into force of these Regulations did not require the recording of that particular item, or

(b) the recording of a particular item as at the end of a previous financial year, and—

(i) that previous financial year ended before the coming into force of these Regulations, and

(ii) the legislation in force as at the end of that previous financial year did not require the recording of that particular item,

then if the records of the society are so kept as to enable that particular item to be identified, it shall be identified and so recorded, but if the records of the society are not so kept, it shall be included on the basis of an estimate.

(2) Where under paragraph (1) an estimate is used in respect of any item, that fact shall be disclosed in a note to the accounts.

Further transitional provision

13

A Society may, with respect to a financial year which commenced before the coming into force of these Regulations, prepare such annual accounts as it would have been required to prepare had these Regulations not been made.

Revocation

14

The Building Societies (Accounts and Related Provisions) Regulations 1987,[^f00008] The Building Societies (Accounts and Related Provisions) (Amendment) Regulations 1990[^f00009] and The Building Societies (Accounts and Related Provisions) (Amendment) Regulations 1991[^f00010] are hereby revoked.

SCHEDULE 1

PART I — FORMAT OF SOCIETY INCOME AND EXPENDITURE ACCOUNT

1

Interest receivable

(i) On secured advances

(ii) On other lending

(i) On debt securities

(ii) On other liquid assets

2

Interest payable

(a) On retail funds and deposits

(b) On non-retail funds and deposits

3

Net interest receivable

4

Income from associated bodies

(a) Income from shares in subsidiary undertakings

(b) Income from participating interests

5

Other income and charges

(a) Fees and Commissions receivable

(b) Fees and Commissions payable

(d) Other operating income

(e) Other operating charges

6

Amortisation of intangible fixed assets

7

Administrative expenses

(a) Staff costs

(i) Wages and salaries

(ii) Social security costs

(iii) Other pension costs

(b) Depreciation and other amounts written off tangible fixed assets

8

Provisions

(a) Provisions for bad and doubtful debts

(b) Provisions for contingent liabilities and commitments.

9

Adjustments to provisions

(a) Adjustments to provisions for bad and doubtful debts

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

10

Amounts written off fixed asset investments

11

Adjustments to amounts written off fixed asset investments

12

Profit or loss on ordinary activities before tax

13

Tax on profit or loss on ordinary activities

14

Profit or loss on ordinary activities after tax

15

Extraordinary income

16

Extraordinary charges

17

Extraordinary profit or loss

18

Tax on extraordinary profit or loss

19

Extraordinary profit or loss after tax

20

Other taxes not shown under the preceding items

21

Profit or loss for the financial year

PART II — FORMAT OF CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT

1

Interest receivable

(i) On secured advances

(ii) On other lending

(i) On debt securities.

(ii) On other liquid assets.

2

Interest payable

(a) On retail funds and deposits

(b) On non-retail funds and deposits

3

Net interest receivable

4

Income from associated bodies

(a) Income from shares in unconsolidated subsidiary undertakings

(b) Income from associated undertakings

(d) Income from other associated bodies

5

Other income and charges

(a) Fees and Commissions receivable

(b) Fees and Commissions payable

(d) Other operating income

(e) Other operating charges

6

Amortisation of intangible fixed assets

7

Administrative expenses

(a) Staff costs

(i) Wages and salaries

(ii) Social security costs

(iii) Other pension costs

(b) Depreciation and other amounts written off tangible fixed assets

8

Provisions

(a) Provisions for bad and doubtful debts

(b) Provisions for contingent liabilities and commitments

9

Adjustments to provisions

(a) Adjustments to provisions for bad and doubtful debts

(b) Adjustments to provisions for contingent liabilities and commitments

10

Amounts written off fixed asset investments

11

Adjustments to amounts written off fixed asset investments

12

Profit or loss on ordinary activities before tax

13

Tax on profit or loss on ordinary activities

14

Profit or loss on ordinary activities after tax

15

Minority interests

16

Profit or loss before extraordinary items

17

Extraordinary income

18

Extraordinary charges

19

Extraordinary profit or loss

20

Tax on extraordinary profit or loss

21

Extraordinary profit or loss after tax

22

Minority interests in extraordinary profit or loss after tax

23

Other taxes not shown under the preceding items

24

Profit or loss for the financial year.

PART III — PROVISIONS APPLICABLE TO PARTS I AND II

1

(1) Item 1(a) and (b) in each of Part I and II shall include

(a) all income from assets entered under Asset items 2, 3, and 4(a), (b) and (c) in the balance sheet in the corresponding Part of Schedule 2, however calculated,

(b) interest receivable on—

(i) in the case of Part I, advances and loans to associated bodies, and

(ii) in the case of Part II, advances and loans to associated bodies other than subsidiary undertakings, and

(c) (in item 1(b) in each case) interest, other income and profits net of losses arising from liquid assets, except to the extent that they are included in item 5(c) in Parts I and II in accordance with paragraph 5 of this Part,

and the notes to the annual accounts shall disclose the amount of profits net of losses arising from liquid assets (except for amounts included in item 5(c) in Parts I and II) and the amount of interest and other income arising from them as separate amounts unless those two amounts are separately stated under each of item 1(b)(i) and 1(b)(ii) in each case.

(2) Item 1 in each Part shall include fees and commissions receivable similar in nature to interest and calculated on a time basis or by reference to the amount of the claim or liability (but not other fees and commissions receivable).

(3) Item 1 in each Part shall also include income from financial instruments, which is spread over the actual duration of the contract and similar in nature to interest.

2

Item 1(a)(i) in Parts I and II shall include all income to which paragraph 1 refers arising from secured loans which are not advances secured on land as well as from advances secured on land.

3

(1) Items 2(a) and (b) in each of Parts I and II shall include as appropriate all charges arising out of liabilities entered under Liability items 10, 11, 15 and 16 in Part I of Schedule 2 or Liability items 11, 12, 16 and 17 of Part II of that Schedule however calculated.

(2) Item 2 in each Part shall include fees and commission payable similar in nature to interest and calculated on a time basis or by reference to the amount of the claim or liability (but not other fees and commissions payable).

(3) Item 2 in each Part shall also include charges on financial instruments, which are spread over the actual duration of the contract and similar in nature to interest.

4

(1) Item 5(a) in Parts I and II shall include income in respect of all services supplied for the account of third parties, apart from fees and commissions required to be included under “interest receivable” in item 1 in each part, and item 5(b) in those parts shall include charges for the use of services of third parties, apart from fees and commissions required to be include under “interest payable” in item 2 in each part.

(2) Any amount, apart from an appointed agency payment, which represents—

(a) fees and commissions for guarantees and loan administration,

(b) commissions and other charges and income in respect of payment transactions, account administration charges and commissions for the safe custody and administration of deeds, securities or other related documents,

(d) commissions and other charges and income in connection with insurance and pension contracts, or

(e) commissions and other charges and income for brokerage services in connection with savings and insurance contracts and loans

and which falls within subparagraph (1) but would also be capable of being included within an item other than those referred to in that subparagraph shall be included within items 5(a) and 5(b) in Parts I and II as appropriate.

(3) Appointed agency payments shall be included within item 7(c) in each Part.

(4) For the purposes of subparagraphs (2) and (3), an appointed agency payment is a payment for a relevant agency function to a person who, by virtue of an appointment by a society, acts as its agent in that function, and a relevant agency function comprises action as an agent of the society for the purpose of receipt of sums in respect of shares or deposits or the making of loans or advances.

5

Item 5(c) in each of Parts I and II 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 as a result of the application of paragraph 16(1) in Schedule 7, and

(b) the net profit or loss on financial instruments, except in so far as that income or charge is included, in accordance with subparagraphs 1(3) and 3(3), under items 1 and 2 in respectively Part I and Part II.

6

Items 5(d) and (e) in each of Parts I and II shall, where they relate to development properties, include respectively the net profit or loss thereon.

7

Item 6 in each of Parts I and II shall comprise amortisation and other amounts written off in respect of Asset item 5 in Part I and Asset item 6 in Part II of Schedule 2.

8

Item 7(b) in each of Parts I and II shall comprise depreciation and other amounts written off in respect of Asset item 6 in Part I and Asset item 7 in Part II of Schedule 2.

9

Item 8(a) in each of Parts I and II shall comprise charges for amounts written off and for provisions made in respect of commercial assets shown under Asset items 2, 3, 4(a), 4(b) and 4(c) in each of Part I and Part II of Schedule 2; and under Asset item 5(a) of Part II of that Schedule.

10

Item 8(b) in each of Parts I and II shall comprise charges for provisions for contingent liabilities and commitments of a type which would, if not provided for, be shown under Memorandum items 20 and 21 in Part I and Memorandum items 22 and 23 in Part II of Schedule 2.

11

Item 9(a) in each of Parts I and II shall include credits from the recovery of commercial assets which were included under Asset items 2, 3, 4(a), 4(b) and 4(c) in each of Parts I and II of Schedule 2 and under Asset item 5(a) of Part II of that Schedule and have been previously written off, or were written back following earlier write offs, and the reduction of provisions previously made with respect to such commercial assets.

12

Item 9(b) in each of Parts I and II shall comprise credits from the reduction of provisions previously made with respect to contingent liabilities and commitments.

13

Item 10 shall comprise amounts written off in respect of transferable securities held as financial fixed assets, participating interests, and shares in subsidiary undertakings which are included in Asset items 1(d) and 4(e) in Parts I and II of Schedule 2.

14

Item 11 shall include amounts written back following earlier write offs and provisions in respect of transferable securities held as financial fixed assets, participating interests and shares in subsidiary undertakings and which are included in Asset items 1(d) and 4(e) in Parts I and II of Schedule 2.

15

In this Schedule “financial instrument” means—

(a) in relation to Parts I and II, an instrument the powers of the society in relation to which are derived from section 23 of the Act (power to hedge) and any option to purchase or sell any liquid asset, and

(b) additionally in relation to Part II, an instrument on which interest or a dividend is capable of being received and which is not an advance, a loan or a liquid asset.

16

Where a heading in either Part I or Part II of this Schedule contains the wording “profit or loss”, such wording shall be replaced by “profit” or “loss” as appropriate.

SCHEDULE 2

PART I — FORMAT OF SOCIETY BALANCE SHEET

ASSETS

1

LIQUID ASSETS

(a) Cash in hand and balances with the Bank of England

(b) Treasury bills and other eligible bills

(i) Treasury bills and similar securities

(ii) Other eligible bills

(d) Debt securities

(i) Issued by public bodies

(ii) Issued by other borrowers

(e) Other

Commercial Assets

2

ADVANCES SECURED ON RESIDENTIAL PROPERTY

3

OTHER ADVANCES SECURED ON LAND

4

OTHER COMMERCIAL ASSETS

(a) Loans for mobile homes

(b) Unsecured loans

(d) Residential properties

(i) Held for rental

(ii) Development properties

(aa) Completed

(ab) Work in progress

(e) Investments in associated bodies

(i) Investments in subsidiary undertakings

(aa) Shares

(bb) Loans

(ii) Investments in participating interests in associated bodies

(aa) Shares

(bb) Loans

(iii) Investments in other associated bodies

(aa) Shares

(bb) Loans

(f) Other

5

INTANGIBLE FIXED ASSETS

6

TANGIBLE FIXED ASSETS

(a) Land and buildings

(b) Plant and machinery

(d) Payments on account and assets in the course of construction

7

OTHER ASSETS

8

PREPAYMENTS AND ACCRUED INCOME

9

TOTAL ASSETS

LIABILITIES

Shares and Deposits

10

RETAIL FUNDS AND DEPOSITS

(a) Shares

(b) Deposits

11

NON-RETAIL FUNDS AND DEPOSITS

(a) Amounts owed to credit institutions

(b) Debt securities in issue

(i) Certificates of deposit

(ii) Negotiable bonds

(iii) Fixed and floating rate notes

(iv) Other

(d) Shares

12

OTHER LIABILITIES

(a) Income tax

(b) Corporation tax

13

ACCRUALS AND DEFERRED INCOME

14

PROVISIONS FOR LIABILITIES AND CHARGES

(a) Provisions for pensions and similar obligations

(b) Provisions for tax

15

SUBORDINATED LIABILITIES

16

SUBSCRIBED CAPITAL

(a) Deferred shares issued on formation

(b) Permanent interest bearing shares

17

REVALUATION RESERVE

18

RESERVES

(a) General reserves

(b) Other reserves

19

TOTAL LIABILITIES

MEMORANDUM ITEMS

20

CONTINGENT LIABILITIES

(a) Guarantees and assets pledged as collateral security

(b) Other contingent liabilities

21

COMMITMENTS

PART II — FORMAT OF CONSOLIDATED BALANCE SHEET

ASSETS

1

LIQUID ASSETS

(a) Cash in hand and balances with the Bank of England

(b) Treasury bills and other eligible bills

(i) Treasury bills and similar securities

(ii) Other eligible bills

(d) Debt securities

(i) Issued by public bodies

(ii) Issued by other borrowers

(e) Other

Commercial Assets

2

ADVANCES SECURED ON RESIDENTIAL PROPERTY

3

OTHER ADVANCES SECURED ON LAND

4

OTHER COMMERCIAL ASSETS

(a) Loans for mobile homes

(b) Unsecured loans

(d) Residential properties

(i) Held for rental

(ii) Development properties

(aa) Completed

(ab) Work in progress

(e) Investments in associated bodies

(i) Investments in unconsolidated subsidiary undertakings

(aa) Shares

(bb) Loans

(ii) Investments in associated undertakings

(aa) Shares

(bb) Loans

(iii) Investments in other participating interests

(aa) Shares

(bb) Loans

(iv) Investments in other associated bodies

(aa) Shares

(bb) Loans

(f) Other

5

OTHER OPERATING ASSETS

(a) Loans

(b) Other

6

INTANGIBLE FIXED ASSETS

7

TANGIBLE FIXED ASSETS

(a) Land and buildings

(b) Plant and machinery

(d) Payments on account and assets in the course of construction.

8

OTHER ASSETS

9

PREPAYMENTS AND ACCRUED INCOME

10

TOTAL ASSETS

LIABILITIES

Shares and Deposits

11

RETAIL FUNDS AND DEPOSITS

(a) Shares

(b) Deposits

12

NON-RETAIL FUNDS AND DEPOSITS

(a) Amounts owed to credit institutions

(b) Debt securities in issue

(i) Certificates of deposit

(ii) Negotiable bonds

(iii) Fixed and floating rate notes

(iv) Other

(d) Shares

13

OTHER LIABILITIES

(a) Income tax

(b) Corporation tax

14

ACCRUALS AND DEFERRED INCOME

15

PROVISIONS FOR LIABILITIES AND CHARGES

(a) Provisions for pensions and similar obligations

(b) Provisions for tax

16

SUBORDINATED LIABILITIES

17

SUBSCRIBED CAPITAL

(a) Deferred shares issued on formation

(b) Permanent interest bearing shares

18

REVALUATION RESERVE

19

RESERVES

(a) General reserves

(b) Other reserves

20

MINORITY INTERESTS

21

TOTAL LIABILITIES

MEMORANDUM ITEMS

22

CONTINGENT LIABILITIES

(a) Guarantees and assets pledged as collateral security

(b) Other contingent liabilities.

23

COMMITMENTS

PART III — PROVISIONS APPLICABLE TO PARTS I AND II

1

The heading “Shares and Deposits” in the balance sheet in Part I of this Schedule may instead be expressed as “Shares, Deposits and Loans” and if it is so expressed—

(a) the corresponding heading in the balance sheet in Part II shall be similarly expressed, and

(b) in the balance sheet in Parts I and II the expression “Other deposits” shall be replaced by the expression “Other deposits and loans”.

2

(1) In respect of any asset or liability item, the following shall be shown either by subdivision of the relevant items or by way of notes to the accounts—

(a) in the case of such items in Part I, claims on, or liabilities to, subsidiary undertakings;

(b) in the case of such items in both Parts I and II, claims on, or liabilities to, any associated body in which the society has a participating interest; and

(c) in the case of such items in both Parts I and II, claims on, or liabilities to, any associated body other than a subsidiary undertaking or a body in which the society has a participating interest.

(2) 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.

(3) The amounts required to be shown in respect of subparagraphs (1)(a) and (b) shall be further subdivided to show the amounts of any assets or liabilities which are subordinated.

(4) For the purposes of subparagraphs (2) and (3), assets or liabilities 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 (other than any creditors ranking pari passu with those liabilities) whether or not a ranking has been agreed between the subordinated creditors concerned.

3

(1) This paragraph applies to Asset item 1 of Parts I and II of this Schedule.

(2) There shall be included in Asset item 1(a)—

(a) banknotes or coinage of any country or territory;

(b) deposits with the Bank of England which may be withdrawn without notice; all other claims on the Bank of England or the Central Banks of other member States of the European Community, Canada, Japan, Sweden, Switzerland and the United States of America shall be included in item 1(c).

(3) There shall be included in Asset item 1(b)(i) Treasury bills and similar debt instruments issued by public bodies which are eligible for refinancing with the Bank of England. Any Treasury bills or similar debt instruments not so eligible shall be included under Asset item 1(b)(ii).

(4) There shall be included in Asset item 1(b)(ii) all bills held as liquid assets that have been purchased to the extent that they are eligible for refinancing with the Bank of England.

(5) There shall be included in Asset item 1(c) all deposits with, but excluding any debt securities issued or guaranteed by, any credit institution authorised by the competent authorities of a Member State of the European Community.

(a) Asset item 1(d) shall comprise transferable debt securities issued or guaranteed by any credit institution authorised by the competent authorities of a Member State of the European Community, or by other undertakings or public bodies.

(b) Debt securities issued by public bodies shall however, only be included in this item if they may not be shown under Asset item 1(b).

(c) Where a society holds its own debt securities these shall not be included under this item but shall be deducted from the appropriate liabilities item.

(d) 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 debt securities to be included under this item.

(7) There shall be included in Asset item 1(d)(i) any asset which represents a liability of, or comprises a debt security issued by any of the following—

(a) the Governments of European Community Member States, Canada, Japan, Sweden, Switzerland or the United States of America;

(b) issuers whose obligations as to payment are fully guaranteed by any of the governments listed in sub-paragraph (i);

(d) intergovernmental investment or development institutions whose capital is subscribed by European Community Member States and other states;

(e) any other body exercising a statutory function within European Community Member States, Canada, Japan, Sweden, Switzerland and the United States of America.

(8) Any transferable debt security which comprises a security issued by a nationalised industry or otherwise does not fall to be included in Asset item 1(d)(i) shall be included in Asset item 1(d)(ii).

(9) For the purposes of this paragraph—

“deposit” means a sum of money paid on terms— under which it will be repaid, with or without interest or a premium, and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it; and which are not referable to the provision of property or services or the giving of security; and, for the purposes of this definition, money is paid on terms which are referable to the provision of property or services or to the giving of security if, and only if— it is paid by way of advance or part payment under a contract for the sale, hire or other provision of property or services, and is repayable only in the event that the property or services is not or are not in fact sold, hired or otherwise provided; it is paid by way of security for the performance of a contract or by way of security in respect of loss which may result from the non performance of a contract; or without prejudice to paragraph (ii) above, it is paid by way of security for the delivery up or return of any property, whether in a particular state of repair or otherwise.

“local authority” means any of the following authorities: in England and Wales, a county council, a district council, a London borough council, a parish or community council, the common Council of the City of London, and the Council of the Isles of Scilly; in Scotland, a local authority within the meaning of section 235 of the Local Government (Scotland) Act 1973[^f00011]; in Northern Ireland, a district council within the meaning of section 1 of the Local Government Act (Northern Ireland) 1972[^f00012];

“relevant authority” means any of the following: a local authority; any authority all the members of which are appointed or elected by one or more local authorities; any authority the majority of the members of which are appointed or elected by one or more local authorities in the United Kingdom, being an authority which by virtue of any enactment has power to issue a precept to a local authority in England and Wales, or a requisition to a local authority in Scotland, or to the expense of which, by virtue of any enactment, a local authority in the United Kingdom is or can be required to contribute; the Receiver for the Metropolitan Police District or a combined police authority (within the meaning of the Police Act 1964[^f00013]); a residuary body within the meaning of section 105(1) of the Local Government Act 1985[^f00014]; a passenger transport executive within the meaning of section 9(1) of the Transport Act 1968[^f00015];

“Treasury bills” means bills issued by Her Majesty’s Government in the United Kingdom and Northern Ireland Treasury Bills.

4

In Asset items 2 and 3 in Parts I and II of this Schedule the expression “ADVANCES SECURED ON RESIDENTIAL PROPERTY” shall correspond to advances which are Class I advances, and the expression “OTHER ADVANCES SECURED ON LAND” to advances which are Class 2 advances, for the purpose of the requirements of Part III (advances, loans and other assets) of the Act for the structure of commercial assets.

5

Within Asset item 4 of Parts I and II of this Schedule—

(a) in item 4(a) there shall be included mobile home loans,

(b) in item 4(b) there shall be included loans to which section 16 (power to lend to individuals) of the Act applies, facility debts (as defined in article 3(2) of the Building Societies (Limited Credit Facilities) Order 1987)[^f00016], bridging debts (as defined in Part IV of Schedule I to the Building Societies (Commercial Assets and Services) Order 1988)[^f00017] and money transmission service debts (as defined in article 3(2) of the Building Societies (Money Transmission Services) Order 1989)[^f00018], and which do not fall to be included in item 4(c),

(c) in item 4(c) there shall be included residual mortgage debts (as defined in Part I of Schedule 1 to the Building Societies (Commercial Assets and Services) Order 1988), leasable chattels (as defined in Part III of Schedule 1 to that Order) and loans or debts which would otherwise fall to be included in item 4(b) in accordance with subparagraph (b) but for the fact that the loan or debt is on any security, whether that security be partial or full and whether it comprises property or a guarantee,

(d) in item 4(d) there shall be included all property to which section 17 of the Act (power to hold and develop land), other than section 17(6), applies,

and each subdivision of that Asset item shall in Part II also apply to any asset which arises from the activity of a subsidiary undertaking and would, were that subsidiary undertaking the society, be an asset to which that subdivision would apply.

6

Mortgage finance rights (as defined in Part II of Schedule 1 to the Building Societies (Commercial Assets and Services) Order 1988)[^f00019] may be included in either of Asset items 1(d) or 4(c).

7

Premises to which section 17(6) of the Act applies (and premises of a subsidiary undertaking which would, were they premises of a society, be premises to which that provision would apply) shall be included in Asset item 6(a) (and not Asset item 4(f)) in Part I of this Schedule, and in Asset item 7(a) (and not in Asset item 4(f)) in Part II of this Schedule).

8

(a) Asset item 5 in Part I and Asset item 6 in Part II of this Schedule shall comprise—

(i) development costs,

(ii) concessions, patents, licences, trade marks and similar rights and assets,

(iii) goodwill, and

(iv) payments on account relating to intangible fixed assets.

(b) Amounts shall be included in respect of the assets mentioned in subparagraph (a)(ii) only if they were acquired for valuable consideration or if they were created by the society or by a subsidiary undertaking.

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

(d) There shall be disclosed, in a note to the accounts the amount of any goodwill included in Asset item 5 in Part I and Asset item 6 of Part II of this Schedule.

9

Asset item 8 in Part I and Asset item 9 in Part II of this Schedule shall include any expenditure incurred during the financial year but relating to a subsequent financial year, together with any income which, although relating to the financial year in question, is not due until after its expiry, except that they shall not include accrued interest in respect of Asset items 1 to 4 in Parts I and II, and asset item 5(a) in Part II of this Schedule, which accrued interest shall be included under those items.

10

(1) Subject to paragraph 13 all liabilities of a subsidiary undertaking of a society in respect of deposits shall be included in Liability item 12 of Part II where they would, were they liabilities of the society, be classifiable as non-retail funds and deposits, and any other such liabilities of the subsidiary undertaking shall be included in Liability item 11 thereof.

(2) Any liabilities of a subsidiary undertaking of a society in respect of shares, where included in the balance sheet in Part II, shall be included in Liability item 20 thereof.

11

(1) In Liability items 11 of Part I and 12 of Part II of this Schedule—

(a) in “Amounts owed to credit institutions” there shall be included liabilities to which subsection (4)(bb) of section 7 of the Act[^f00020] applies (or, where in Part II the liability is that of a subsidiary undertaking, would apply were that subsidiary undertaking the society);

(b) in “Debt securities in issue” there shall be included liabilities to which subsection (4)(a) and (aa) of that section applies (or, where in Part II the liability is that of a subsidiary undertaking, would apply were that subsidiary undertaking the society).

(2) For the purpose of those Liability items—

(a) “certificate of deposit” means a certificate relating to money deposited with the issuer which recognises an obligation to pay a stated amount to bearer or to order, with or without interest, and by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable;

(b) “floating rate note” means a note which embodies a right, transferable to any person by delivery or by a method specified in the note, to receive a principal sum and interest at a rate which is variable at times specified in the note;

(c) “fixed rate note” means a note which embodies a right, transferable to any person by delivery or by a method specified in the note, to receive a principal sum and interest at a rate which is fixed as specified in the note.

12

Liability item 13 in Part I and Liability item 14 in Part II of this Schedule shall include any income relating to a subsequent financial year, together with any charges which although relating to the financial year in question, will be payable only in the course of a subsequent financial year, except that they shall not include accrued interest in respect of Liability items 10 and 11 in Part I and Liability items 11 and 12 in Part II, which accrued interest shall be included under those items.

13

(1) Liability item 15 in Part I and Liability item 16 in Part II of this schedule 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. All subordinated liabilities shall be included, whether or not a ranking has been agreed between the subordinated creditors concerned.

(2) Any subordinated loan capital of the society shall be included in Liability item 15 in Part I and Liability item 16 in Part II of this Schedule and in no other such Liability item, but this requirement shall not be taken to exclude the obligation to include in Liability item 16 in Part II subordinated liabilities of subsidiary undertakings.

14

Liability item 16(a) in Part I and Liability item 17(a) in Part II of this Schedule shall include any deferred shares which may be aggregated with reserves for the purposes of the first criterion of section 45(3) of the Act under the Building Societies (Designated Capital Resources) (Deferred Shares) Order 1989[^f00021].

15

Liability item 16(b) in Part I and Liability item 17(b) in Part II of this Schedule shall include any permanent interest bearing shares which may be aggregated with reserves for the purposes of the first criterion of section 45(3) of the Act under the Building Societies (Designated Capital Resources) (Permanent Interest Bearing Shares) Order 1991[^f00022].

16

Memorandum item 20 in Part I and Memorandum item 22 in Part II of this Schedule shall include all transactions whereby the society (or the society and its subsidiary undertakings in respect of Part II) has underwritten the obligations of a third party.

17

Memorandum item 20(a) in Part I and Memorandum item 22(a) in Part II of this Schedule shall include all guarantee obligations incurred and assets pledged as collateral on behalf of third parties by the society (or the society and its subsidiary undertakings in respect of Part II).

18

Memorandum item 21 in Part I and Memorandum item 23 in Part II of this Schedule shall include every irrevocable commitment which would give rise to a credit risk to the society (or the society and its subsidiary undertakings in respect of Part II).

19

(1) The following rules apply where a society (or the society and its subsidiary undertakings in respect of Part II) is a party to a sale and repurchase transaction.

(2) Where the society 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 appropriate as an amount owed to the transferee; and

(3) Where the society 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.

20

(1) For the purpose of this paragraph “managed funds” are funds which the society (or the society and its subsidiary undertakings in respect of Part II) administers in its own name but on behalf of others and to which it has legal title.

(2) Where claims and obligations arising in respect of managed funds fall to be treated as claims and obligations of the society (or the society and its subsidiary undertakings in the case of Part II) such claims and obligations representing managed funds may be included in the balance sheet, with 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.

21

(1) Where a society (or the society and its subsidiary undertaking in the case of Part II) is a party to a syndicated loan transaction, it shall include in the balance sheet only that part of the total loan which it has funded itself.

(2) Where a society (or the society and its subsidiary undertakings in the case of Part II) 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 Memorandum item 20(a) in Part I or 22(a) of Part II of this Schedule.

SCHEDULE 3

PART I — FORMAT OF SOCIETY STATEMENT OF THE SOURCE AND APPLICATION OF FUNDS

Source of Funds

1

Increase in free capital

2

Advances and loans repaid by borrowers

3

Net receipts from retail funds and deposits

4

Net receipts from non-retail funds and deposits

5

Other items

6

Total source of funds

Application of Funds

7

Increase in liquid assets

8

Advances and loans made to borrowers

9

Increase in other commercial assets

10

Other items

11

Total application of funds Increase in Free Capital Source of Funds

12

Profit on ordinary activities after tax

13

Extraordinary profit after tax

14

Adjustment for items not involving the movement of funds

(a) Depreciation and other amounts written off tangible fixed assets

(b) Amortisation of intangible fixed assets

(d) Profit on disposal of intangible fixed assets

(e) Profit on disposal of tangible fixed assets

(f) Increase in general provision for bad and doubtful debts

15

Funds generated from operations

16

Funds from other sources

(a) Disposal of tangible fixed assets

(b) Disposal of intangible fixed assets

(d) Issue of subscribed capital

17

Application of Funds

(a) Purchase of tangible fixed assets

(b) Purchase of intangible fixed assets

(d) Repayment of subscribed capital

18

Increase in free capital.

PART II — FORMAT OF CONSOLIDATED STATEMENT OF THE SOURCE AND APPLICATION OF FUNDS

Source of Funds

1

Increase in free capital

2

Advances and loans repaid by borrowers

3

Net receipts from retail funds and deposits

4

Net receipts from non-retail funds and deposits

5

Other items

6

Total source of funds

Application of Funds

7

Increase in liquid assets

8

Advances and loans made to borrowers

9

Increase in other commercial assets

10

Increase in other operating assets

11

Other items

12

Total application of funds

Increase in Free Capital

Source of Funds

13

Profit on ordinary activities after tax

14

Extraordinary profit after tax

15

Adjustment for items not involving the movement of funds:

(a) Depreciation and other amounts written off tangible fixed assets

(b) Amortisation of intangible fixed assets

(d) Profit on disposal of intangible fixed assets

(e) Profit on disposal of tangible fixed assets

(f) Increase in general provision for bad and doubtful debts

(g) Profits retained in associated undertakings

(h) Minority interests

16

Funds generated from operations

17

Funds from other sources

(a) Disposal of tangible fixed assets

(b) Disposal of intangible fixed assets

(d) Issue of subscribed capital

18

Application of Funds

(a) Purchase of tangible fixed assets

(b) Purchase of intangible fixed assets

(d) Repayment of subscribed capital

(e) Dividends paid to minority shareholders

19

Increase in free capital

PART III — PROVISIONS APPLICABLE TO PARTS I AND II

1

In Parts I and II assets to which section 17(6) of the Act applies shall be treated as tangible fixed assets and not as commercial assets.

2

In Part II—

(a) any asset which arises from the activity of a subsidiary undertaking and would, were the subsidiary undertaking the society, be a commercial asset, shall (subject to subparagraph (b)) be treated as a commercial asset, but

(b) assets to which section 17(6) of the Act would apply by the operation of subparagraph (a) shall be treated as tangible fixed assets and not as commercial assets.

3

(1) No subordinated loan capital shall, in Part I or II of this Schedule, be treated as retail or non-retail funds and deposits.

(2) Subject to subparagraph (1), in Part II the liabilities of any subsidiary undertaking of a society in respect of deposits which would, were they liabilities of the society, be classifiable as non-retail funds and deposits shall be treated as non-retail funds and deposits and any other such liabilities of the subsidiary undertaking shall be treated as retail funds and deposits.

4

Where subsidiary undertakings have been acquired or disposed of during a financial year to which a statement of the source and application of funds relates, the effect of such acquisitions or disposals shall be summarised in aggregate by way of a footnote to the statement which shall be separate from the notes to the annual accounts.

5

(1) There shall be inserted in the notes to the annual accounts such analyses of the relevant items as are material to the assessment of the key factors.

(2) For the purposes of subparagraph (1)—

(a) the relevant items are item 9 in Part I and items 9 and 10 in Part II of this Schedule, and

(b) the key factors, in relation to any statement of the source and application of funds, are—

(i) in Part I, the manner in which the business of the society has been financed and in which its financial resources have been used, and

(ii) in Part II, the manner in which the business of the society and its subsidiary undertakings has been financed and in which their financial resources have been used,

during the financial year to which the statement relates.

6

(1) Where in any item in a statement in Part I or II a positive term is used, and the amount referable thereto represents its corresponding negative term, the corresponding negative term shall be used instead and, where that change falls to be made within the relevant section of the statement, the format of the relevant section of the statement shall be changed so far as necessary to include that item in the grouping opposite to that specified for it in the format.

(2) For the purposes of sub-paragraph (1) the positive terms are increase, receipt and profit, their respective corresponding negative terms are decrease, outflow and loss, the groupings are source of funds and application of funds, and the relevant section of the statement comprises—

(a) in Part I, the section ending with item 11, and

(b) in Part II, the section ending with item 12.

SCHEDULE 4 — FORM AND CONTENT OF THE ANNUAL ACCOUNTS OF A GROUP ACCOUNTS SOCIETY

General Rules

1

(1) The consolidated income and expenditure account, the consolidated balance sheet and the consolidated statement of the source and application of funds shall incorporate in full the information contained in the individual accounts of the subsidiary undertakings included in the consolidation, subject to the adjustments authorised or required by the following provisions of this Schedule and to such other adjustments (if any) as may be appropriate in accordance with generally accepted accounting principles or practice.

(2) If the financial year of a subsidiary undertaking included in the consolidation differs from that of the society, the group accounts shall be made up—

(a) from the accounts of the subsidiary undertaking for its financial year last ending before the end of the society’s financial year, provided that year ended no more than three months before that of the society, or

(b) from interim accounts prepared by the subsidiary undertaking as at the end of the parent society’s financial year.

2

(1) Where assets and liabilities to be included in the consolidated balance sheet have been valued or otherwise determined by subsidiary undertakings according to accounting rules differing from those used in the annual accounts of a group accounts society, the values or amounts shall be adjusted so as to accord with the rules used for the annual accounts of the group accounts society.

(2) If it appears to the directors of the society that there are special reasons for departing from the requirements of subparagraph (1) they may do so, but particulars of any such departure, the reasons for it and its effect shall be given in a note to the accounts.

(3) The adjustments referred to in this paragraph need not be made if they are not material for the purpose of giving a true and fair view for the society and its subsidiary undertakings as a whole of the matters set out in subsections (2), (3) and (4) of section 73 of the Act.

3

Any differences of accounting rules as between a society’s individual accounts for a financial year and its consolidated accounts shall be disclosed in a note to the accounts and the reasons for the differences given.

4

Amounts which in the particular context of any provision of this Schedule are not material may be disregarded for the purposes of that provision.

Elimination of group transactions

5

(1) Debts and claims between undertakings included in the consolidation, and income and expenditure relating to transactions between such undertakings, shall be eliminated in preparing the consolidated accounts.

(2) Where profits and losses resulting from transactions between undertakings included in the consolidation are included in the book value of assets, they shall be eliminated in preparing the group accounts.

(3) The elimination required by subparagraph (2) may be effected in proportion to the society’s interest in the shares of the undertakings.

(4) Subparagraphs (1) and (2) need not be complied with if the amounts concerned are not material for the purpose of giving a true and fair view for the society and its subsidiary undertakings as a whole of the matters set out in subsections (2), (3) and (4) of section 73 of the Act.

Acquisition accounting

6

(1) The following provisions apply where an undertaking becomes a subsidiary undertaking of the society.

(2) That event is referred to in those provisions as an “acquisition”, and references to the “undertaking acquired” shall be construed accordingly. 7. An acquisition shall be accounted for by the acquisition method of accounting, unless the conditions for accounting for it as a merger as set out in paragraph 10 of Schedule 4A to the Companies Act 1985[^f00023] are met, in which case the merger method of accounting as detailed in paragraph 11 of the said Schedule 4A shall be employed.

8

(1) The acquisition method of accounting is set out in the following subparagraphs.

(2) The identifiable assets and liabilities of the undertaking acquired shall be included in the consolidated balance sheet at their fair values as at the date of acquisition.

(3) In this paragraph the “identifiable” assets or liabilities of the undertaking acquired means the assets or liabilities which are capable of being disposed of or discharged separately, without disposing of a business of the undertaking.

(4) The income and expenditure of the undertaking acquired shall be brought into the annual accounts of a group accounts society only as from the date of the acquisition.

(5) There shall be set off against the acquisition cost of the interest in the shares of the undertaking held by the society and its subsidiary undertakings the interest of the society and its subsidiary undertakings in the adjusted capital and reserves of the undertaking acquired, and for this purpose—

“the acquisition cost” means the amount of any cash consideration and the fair value of any other consideration, together with such amount (if any) in respect of fees and other expenses of the acquisition as the society may determine, and

“the adjusted capital and reserves” of the undertaking acquired means its capital and reserves at the date of the acquisition after adjusting the identifiable assets and liabilities of the undertaking to fair values as at that date.

(6) The resulting amount shall be treated, if positive, as goodwill, and if negative as a negative consolidation difference.

9

(1) Where a group is acquired paragraph 8 applies with the adaptations set out in subparagraphs (2) and (3).

(2) References to shares of the undertaking acquired shall be construed as references to shares of the parent undertaking of the group.

(3) Other references to the undertaking acquired shall be construed as references to the group; and references to the assets and liabilities, income and expenditure and capital and reserves of the undertaking acquired shall be construed as references to the assets and liabilities, income and expenditure and capital and reserves of the group after making the set-offs and other adjustments required by this Schedule in the case of group accounts.

10

(1) The following information with respect to acquisitions taking place in the financial year shall be given in a note to the accounts—

(a) the name of the undertaking acquired or, where a group was acquired, the name of the parent undertaking of that group,

(b) whether the acquisition was accounted for by the acquisition method or by the merger method of accounting.

(2) In relation to an acquisition which significantly affects the figures shown in the annual accounts of a group accounts society the following further information shall be given—

(a) the composition and fair value of the consideration for the acquisition given by the society and its subsidiary undertaking;

(b) the profit or loss of the undertaking or group acquired—

(i) for the period from the beginning of the financial year of the undertaking or, as the case may be, of the parent undertaking of the group, up to the date of the acquisition, and

(ii) for the previous financial year of that undertaking or parent undertaking, and there shall also be stated the date on which the financial year referred to in (i) began;

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