The Building Societies (Accounts and Related Provisions) Regulations 1992

• (1) Where a fixed asset investment of a description falling to be included under Asset item 4(e) of Parts I and II of Schedule 2, or any liquid asset held as a financial fixed asset, has diminished in value, provisions for diminution in value may be made in respect of it, and the amount to be included in respect of it may be reduced accordingly.

• (2) Any such provisions as are mentioned in subparagraph (1) and which are not shown in the income and expenditure accounts shall be disclosed, either separately or in aggregate, in a note to the accounts, analysed according to balance sheet category.

• (3) Provisions for diminution in value shall be made in respect of any fixed asset which has diminished in value if the reduction in 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 in the income and expenditure accounts shall be disclosed, either separately or in aggregate, in a note to the accounts, analysed according to balance sheet category.

• (4) Where the reasons for which any provision in respect of fixed assets (whether or not it is one to which subparagraphs (1) or (3) applies) was made 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 in the income and expenditure accounts shall be disclosed (either separately or in aggregate) in a note to the accounts.

Development costs

11

• (1) Notwithstanding that amounts representing “development costs” may be included under Asset item 5 in Part I and Asset item 6 in Part II of Schedule 2, an amount may only be included in a society’s balance sheet in respect of development costs in accordance with generally accepted accounting principles.

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

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

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

Goodwill

12

• (1) The application of paragraphs 8 to 10 in relation to goodwill (in any case where goodwill is treated as an asset) is subject to the following provisions of this paragraph.

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

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

Financial fixed assets

13

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

• (2) The amount included in the balance sheet with respect to such a security as is mentioned in subparagraph (1) purchased at a premium shall be reduced each financial year on a systematic basis so as to write the premium off over the period to the maturity date of the security, and the amounts written off shall be charged to the income and expenditure account for the relevant financial years.

• (3) The amount included in the balance sheet with respect to such a security purchased at a discount shall be increased each financial year on a systematic basis 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 income and expenditure account for the relevant financial years.

• (4) The notes to the accounts shall disclose the amounts of any unamortised premium or discount not extinguished which are 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 and “discount” means any deficit of the amount paid for a security over its maturity value.

PART IV — CURRENT ASSETS

14

he amount to be included in respect of loans and advances to credit institutions, debt securities, and commercial assets not held as financial fixed assets, shall be, subject to paragraphs 15 and 16, their cost.

15

• (1) If the net realisable value of any current asset is lower than its cost the amount to be included in respect of that asset shall be the net realisable value.

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

16

• (1) Subject to paragraph 15, the amount to be included in the balance sheet in respect of transferable securities not held as financial fixed assets may be the higher of their cost or their market value at the balance sheet date.

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

PART V — OTHER ACCOUNTING RULES

General rules

17

• (1) Without prejudice to paragraph 3(6)(c) of Part III of Schedule 2, amounts in respect of items representing assets or income may not be set off against amounts in respect of items representing as the case may be liabilities or expenditure, or vice versa.

• (2) Charges required to be included in items 8(a) and 8(b) in Parts I and II of Schedule 1 may, however, be set off against income required to be included in items 9(a) and 9(b) of Parts I and II of that Schedule and the resulting figure shown as a single item.

• (3) Charges required to be included in item 10 in Parts I and II of Schedule 1 may also be set off against income required to be included in item 11 in Parts I and II of Schedule 1 and the resulting figure shown as a single item.

18

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

• (2) A society 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 society.

19

reliminary expenses, expenses of and commission on any issue of subscribed capital and costs of research shall not be treated as assets in a society’s balance sheet.

20

Assets acquired in the name of and on behalf of third parties shall not be shown in the balance sheet.

Excess of money owed over value received as an asset item

21

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

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

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

• (b) if the current amount is not shown as a separate item in the society’s balance sheet it must be disclosed in a note to the accounts.

Determination of cost

22

• (1) The cost of an asset shall be determined by adding to the actual price paid any expenses incidental to its acquisition.

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

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

• (a) a reasonable proportion of the costs incurred by the society 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 paragraph (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 accounts.

23

• (1) Subject to the qualification mentioned below, the cost of any assets which are fungible assets (including liquid assets) may be determined by the application of any of the methods mentioned in subparagraph (2) in relation to any such assets of the same class, but the method chosen must be one which appears to the directors to be appropriate to the circumstances of the society.

• (2) Those methods are—

• (a) the method known as “first in, first out” (FIFO),

• (b) the method known as “last in, first out” (LIFO),

• (c) a weighted average price, and

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

• (3) Where in the case of any society—

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

• (b) the amount shown in respect of that item differs materially from the relevant alternative amount given below in this paragraph, the amount of that difference shall be disclosed in a note to the accounts.

• (4) Subject to subparagraph (5), for the purposes of subparagraph (3)(b), the relevant alternative amount, in relation to any item shown in a society’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 balance sheet date.

• (5) The relevant alternative amount may be determined by reference to the most recent actual cost before the balance sheet 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 society to constitute the more appropriate standard of comparison in the case of assets of that class.

• (6) For the purposes of this paragraph, assets of any description shall be regarded as fungible if assets of that description are substantially indistinguishable one from another.

24

To the extent that debt securities included in a society’s balance sheet include assets valued at cost, the method of arriving at their cost shall be disclosed in the notes to the annual accounts.

Substitution of original amount where cost unknown

25

Where there is no record of the cost of any asset acquired by a society or of any price, expenses or costs relevant for determining its cost in accordance with paragraph 22, or any such record cannot be obtained without unreasonable expense or delay, its cost shall be taken for the purposes of paragraphs 8 to 16 to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the society.

PART VI — ALTERNATIVE ACCOUNTING RULES

26

he rules set out in paragraphs 8 to 25 of this Schedule are referred to below in this Schedule as the historical accounting rules.

27

Subject to paragraphs 29 and 30, the amounts to be included in respect of assets of any description mentioned in paragraph 28 may be determined on any basis so mentioned.

28

• (1) Intangible fixed assets, other than goodwill, may be included at their current cost.

• (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 in the balance sheet as investments in associated bodies or debt securities held as financial fixed assets may be included either

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

• (b) at a value determined on any basis which appears to the directors to be appropriate in the circumstances of the society, but in the latter case particulars of the method of valuation adopted and of the reasons for adopting it shall be disclosed in a note to the accounts.

• (4) Investments of any description not held as financial fixed assets (if not valued in accordance with paragraph 16) may be included at their current cost.

29

• (1) Where the value of any asset of a society is determined on any basis mentioned in paragraph 28, that value shall be, or (as the case may require) shall be the starting point for determining, the amount to be included in respect of that asset in the society’s accounts, instead of its cost or any value previously so determined for that asset; and methods of depreciation to be used pursuant to these Regulations shall apply accordingly in relation to any such asset with the substitution for any reference to its cost of a reference to the value most recently determined for that asset on any basis mentioned in paragraph 28.

• (2) The amount of any provision for depreciation required in the case of any fixed asset by paragraph 9 or 10 as it applies by virtue of subparagraph (1) is referred to below 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 income and expenditure 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 the amount of any difference between the two is shown separately in the income and expenditure account or in a note to the accounts.

30

• (1) With respect to any determination of the value of an asset of a society on any basis mentioned in paragraph 28, the amount of any profit or loss arising from that determination (after allowing, where appropriate, for any provisions for depreciation or diminution in value made otherwise than by reference to the value so determined and any adjustments of any such provisions made in the light of that determination) shall be credited or, as the case may be, debited to a separate reserve (referred to in these Regulations as “the revaluation reserve”).

• (2) The revaluation reserve shall be reduced to the extent that the amounts standing to the credit of that reserve are no longer necessary for the purpose of the accounting policies adopted by the society, but an amount may only be transferred from that reserve to the income and expenditure account if either—

• (a) the amount in question was previously charged to that account, or

• (b) it represents a realised profit.

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

PART VII — ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

31

• (1) Subject to the following subparagraphs, amounts to be included in respect of assets and liabilities denominated in foreign currencies shall be in sterling after translation at an appropriate spot rate of exchange prevailing at the balance sheet date.

• (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 items 5 and 6 in Part I or items 6 and 7 of Part II of Schedule 2, 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 assets or liabilities held, or any transaction entered into, for hedging purposes, or to any assets or liabilities which are themselves hedged.

32

• (1) Subject to subparagraph (2), any difference between the amount to be included in respect of an asset or liability under paragraph 31 and the book value, after translation into sterling at an appropriate rate, of that asset or liability, shall be credited or, as the case may be, debited to the income and expenditure account.

• (2) In the case however of assets held as financial fixed assets, of assets to be included in items 5 and 6 in Part I or items 6 and 7 in Part II of Schedule 2, and of transactions undertaken to cover such assets, any such difference shall be deducted from or credited to the general reserve included in the balance sheet.

SCHEDULE 8 — DIRECTORS' REPORT

1

There shall be stated the names of the persons who, at any time during the financial year, were directors of the society.

2

The directors' report shall contain—

• (a) a statement of the business objectives and activities of the society and its associated bodies,

• (b) particulars of any events which have occurred since the end of the financial year and which are considered by the directors of the society to have an important effect on the society or any of its associated bodies, and

• (c) an indication of the opinion of the directors of the society as to the developments which they consider likely to happen in the business of the society and its associated bodies.

3

• (1) If significant changes in the fixed assets of the society or of any subsidiary undertaking have occurred in the financial year, the report shall contain particulars of the changes.

• (2) If, in the case of such of those fixed assets as consist in interests in land and buildings, their market value (as at the end of the financial year) differs substantially from the amount at which they are included in the balance sheet, and the difference is, in the directors' opinion, of such significance as to require that the attention of members of the society should be drawn to it, the report shall indicate the difference with such degree of precision as is practicable.

4

• (1) The following applies if the society or any subsidiary undertaking of the society has in the financial year given money for political purposes or charitable purposes or both.

• (2) If the money given exceeded £200 in amount, there shall be contained in the directors' report for the year—

• (a) in the case of each of the purposes for which the money has been given, a statement of the amount of money given for that purpose, and

• (b) in the case of political purposes for which money has been given, the following particulars (so far as is applicable):

• (i) the name of each person to whom money has been given for those purposes exceeding £200 in amount and the amount of money given; and

• (ii) if money exceeding £200 in amount has been given by way of donation or subscription to a political party, the identity of the party and the amount of money given.

• (3) For the purposes of this paragraph a society or a subsidiary undertaking is to be treated as giving money for political purposes if, directly or indirectly—

• (a) it gives a donation or subscription to a political party of the United Kingdom or any part of it, or

• (b) it gives a donation or subscription to a person who, to the society’s knowledge (or, as the case may be, that of the subsidiary undertaking), is carrying on, or proposing to carry on, any activities which can, at the time at which the donation or subscription was given, reasonably be regarded as likely to affect public support for such a political party as is mentioned.

• (4) For the purposes of this paragraph money given for charitable purposes to a person who, when it was given, was ordinarily resident outside the United Kingdom shall be left out of account.

• (5) In this paragraph, “charitable purposes” means purposes which are exclusively charitable; and, as respects Scotland, “charitable” is to be construed as if it were contained in the Income Tax Acts.

5

• (1) Subject to subparagraphs (2) and (3), the directors' report shall state the following, with respect to each person who, at the end of the financial year, was a director of the society—

• (a) whether or not he was at the end of that year interested in shares in, or debentures of, any associated body of the society,

• (b) if he was so interested—

• (i) the number and amount of shares in, and debentures of, each such body (specifying it) in which he was then interested,

• (ii) whether or not he was, at the beginning of that year (or, if he was not then a director, when he became one), interested in shares in, or debentures of, that or any other such body, and

• (iii) if he was, the number and amount of shares in, and debentures of, each body (specifying it) in which he was interested at the beginning of the financial year or (as the case may be) when he became a director.

• (2) The particulars required by subparagraph (1) may be given by way of notes to the society’s annual accounts in respect of the financial year, instead of being stated in the directors' report.

• (3) Particulars required by subparagraph (1) are not required to be given in respect of directors' nominee shareholdings, held on behalf of the society.

• (4) Any changes in the details disclosed under subparagraph (1) between the end of the year and the relevant date must be disclosed in the directors' report and any such change after that date may be so disclosed.

• (5) For the purposes of subparagraph (4) “the relevant date” is

• (a) the date one month prior to the date of the notice of the society’s annual general meeting, or

• (b) if earlier, the date on which approval, under section 80 of the Act, of components of the annual accounts is completed.

6

• (1) This paragraph applies to the directors' report where the average number of persons employed by the society in each month during the financial year exceeded 250.

• (2) For the purposes of subparagraph (1) the average number is the quotient derived by dividing, by the number of complete calendar months in the financial year, the number derived by ascertaining, in relation to each of those months, the number of persons who, under contracts of service, were employed in the month (whether throughout it or not) by the society, and adding up the numbers ascertained.

• (3) The directors' report shall where this paragraph applies contain a statement describing such policy as the society has applied during the financial year—

• (a) for giving full and fair consideration to applications for employment by the society made by disabled persons, having regard to their particular aptitudes and abilities,

• (b) for continuing the employment of, and for arranging appropriate training for, employees of the society who have become disabled persons during the period when they were employed by the society, and

• (c) otherwise for the training, career development and promotion of disabled persons employed by the society.

• (4) The directors' report shall where this paragraph applies also contain a statement describing the action that has been taken during the financial year to introduce, maintain or develop arrangements aimed at—

• (a) providing employees systematically with information on matters of concern to them as employees,

• (b) consulting employees or their representatives on a regular basis so that the views of employees can be taken into account in making decisions which are likely to affect their interests,

• (c) encouraging the involvement of employees in the society’s performance, and

• (d) achieving a common awareness on the part of all employees of the financial and economic factors affecting the performance of the society.

• (5) In this paragraph—

• (a) “employment” means employment other than employment to work wholly or mainly outside the United Kingdom, and “employed” and “employee” shall be construed accordingly; and

• (b) “disabled person” means the same as in the Disabled Persons (Employment) Act 1944[^f00030] and the Disabled Persons (Employment) Act (Northern Ireland) 1945[^f00031]

7

• (1) The directors' report shall disclose, in accordance with subparagraph (2)—

• (a) free capital as a percentage of the total of the share and deposit liabilities in the balance sheet,

• (b) gross capital as a percentage of the total of the share and deposit liabilities in the balance sheet,

and, where consistency with the use of expression in the balance sheet so requires, the expression “share, deposit and loan liabilities” shall be used in the directors' report in place of the expression “share and deposit liabilities”.

• (2) The matters required to be disclosed by subparagraph (1) shall be disclosed—

• (a) where the society is a single accounts society, in relation to the society, and

• (b) where the society is a group accounts society, in relation to the society and its subsidiary undertakings.

8

The directors' report shall also disclose the number of mortgage accounts twelve or more months in arrears and the total amount of such arrears.

SCHEDULE 9 — ANNUAL BUSINESS STATEMENT

Statutory ratios and percentages

1

• (1) Subject to the following provisions of this paragraph, the annual business statement of a society shall state, as at the end of the financial year with which it deals, the following ratios and particulars:

• (a) a ratio showing—

• (i) as its first quantity, non-retail funds and deposits as a percentage of shares and deposits, and

• (ii) as its second quantity, the relevant statutory limit for that percentage;

• (b) a ratio showing—

• (i) as its first quantity, deposits as a percentage of shares and deposits, and

• (ii) as its second quantity, the relevant statutory limit for that percentage;

• (c) advances secured on residential property as a percentage of total commercial assets;

• (d) advances secured on land other than residential property as a percentage of total commercial assets;

• (e) a ratio showing—

• (i) as its first quantity, commercial assets other than advances secured on land as a percentage of total commercial assets, and

• (ii) as its second quantity, the relevant statutory limit for that percentage; and

• (f) a ratio showing—

• (i) as its first quantity, the aggregate of the assets to which paragraphs (d) and (e)(i) refer as a percentage of total commercial assets, and

• (ii) as its second quantity, the relevant statutory limit for that percentage.

• (2) The annual business statement shall include an explanation of what is represented by—

• (a) each of the quantities specified in subparagraph (1);

• (b) the description of advances referred to in—

• (i) subparagraph (1)(c), and

• (ii) subparagraph (1)(d); and

• (c) each of the relevant statutory limits specified in subparagraph (1).

• (3) In subparagraph (1)—

• (a) in paragraph (a), the first quantity shall be shown in accordance with subsection (3) of section 7 of the Act (power to raise funds and borrow money) and accordingly—

• (i) “non-retail funds and deposits” means liabilities of the society in respect of its non- retail funds and deposits less those of them which are among the particular liabilities to which subsection (14) of that section refers, and

• (ii) “shares and deposits” means the total liabilities of the society in respect of shares and deposits less the particular liabilities to which subsection (14) of that section refers;

• (b) in paragraph (b), the first quantity shall be shown in accordance with subsection (1) of section 8 of the Act (proportion of liabilities to be in form of shares) and accordingly—

• (i) “deposits” means the amount of the principal of, and interest payable on, sums deposited with the society less that part of it which comes within the particular liabilities to which subsection (2) of that section refers, and

• (ii) “shares and deposits” means the aggregate of the principal of, and interest payable on, sums deposited with the society and the principal value of, and interest payable on, shares in the society less the particular liabilities to which subsection (2) of that section refers;

• (c) in paragraph (c), “advances secured on residential property” means those commercial assets which are class 1 assets for the purpose of the requirements of Part III of the Act for the structure of commercial assets;

• (d) in paragraph (d), “advances secured on land other than residential property” means those commercial assets which are class 2 assets for the purpose of the requirements of Part III of the Act for the structure of commercial assets; and

• (e) “relevant statutory limit” shall be construed—

• (i) subject to subparagraph (ii), in accordance with section 36 of the Act (powers in event of breach of limits), and

• (ii) where the relevant statutory limit imposed by subsection (2) (or (3))

of section 20 (commercial asset structure requirement) in respect of a particular financial year of a society is the amount imposed by paragraph (b) of that subsection, as if that amount were expressed as a percentage of the total commercial assets of the society as at the end of that financial year.

• (4) Where relevant rules are in force so as to attribute to a society assets or liabilities of a body corporate associated with it, the ratios and particulars required to be shown by this paragraph shall be shown so as to take that attribution into account, and—

• (a) where such relevant rules make provision for the disregarding of assets or liabilities of the society, those ratios and particulars shall be shown so as to take that provision into account, and

• (b) in this paragraph “relevant rules” means—

• (i) aggregation rules under section 7(10), 8(3) or 20(9) of the Act, or

• (ii) rules approved under section 7(13), 8(5)

or 20(12) of the Act.

Other percentages

2

• (1) Subject to the following provisions of this paragraph, the annual business statement of a society shall state the following particulars in respect of the society both in relation to the financial year with which it deals and in relation to the previous financial year—

• (a) as a percentage of the share and deposit liabilities as at the balance sheet date—

• (i) the gross capital as at that date, and

• (ii) the free capital as at that date;

• (b) the liquid assets as at the balance sheet date as a percentage of the total assets as at that date;

• (c) the profit or loss after taxation as a percentage of—

• (i) the mean reserves, and

• (ii) the mean total assets; and

• (d) (except where there is no extraordinary profit or loss shown in the income and expenditure account in relation to either of those financial years) the ordinary profit or loss after taxation as a percentage of—

• (i) the mean reserves, and

• (ii) the mean total assets.

• (2) Where the society is a group accounts society, the particulars required to be stated by subparagraph (1) in respect of the society shall be stated in respect of the society and its subsidiary undertakings, but this subparagraph shall not be taken to prohibit the stating in addition by a society of those particulars in respect of the society alone.

• (3) Any matter required by subparagraph (1) to be stated as a particular in, or to be used as a factor in calculating a particular required by this paragraph to be stated in, the annual business statement and which relates to a previous financial year is required to be so stated or used for the purpose of assisting the assessment of the corresponding particular for the financial year with which the annual business statement deals and accordingly shall, where it can be derived from an amount in annual accounts adjusted in accordance with Regulation 3(6)(b), be derived from that amount as so adjusted.

• (4) The annual business statement shall include an explanation of what is represented by each of the particulars referred to in subparagraph (1) and, where subparagraph (2) applies, a statement of the basis on which particulars are stated by virtue of that subparagraph.

• (5) Subject to subparagraph (3), in this paragraph—

• (a) “share and deposit liabilities” means the aggregate of liabilities in the balance sheet representing retail and non-retail funds and deposits;

• (b) “liquid assets” and “total assets” shall be taken from the items so named in the balance sheet;

• (c) “the profit or loss after taxation” shall be taken from item 21 in Part I or, as the case may be, item 24 in Part II of Schedule 1;

• (d) “the ordinary profit or loss after taxation” shall be taken from item 14 in Part I or, as the case may be, item 16 in Part II of Schedule 1;

• (e) “mean reserves” means, in respect of a financial year, the average amount of total reserves which would have been included in the balance sheet throughout that year under item 18 in Part I or, as the case may be, item 19 in Part II of Schedule 2, calculated on a reasonable basis.

• (f) “mean total assets” means, in respect of a financial year, the average amount of total assets which would have been included in the balance sheet throughout that year under item 9 in Part I or, as the case may be, item 10 in Part II of Schedule 2, calculated on a reasonable basis.

• (6) With regard to subparagraph (5)(e) and (f) the basis of calculation used in each case shall be stated in the annual business statement.

• (7) In subparagraph (5)(e) and (f) “reasonable” shall be interpreted in accordance with section 74(5) of the Act.

Information relating to directors and other officers

3

• (1) The annual business statement of a society shall state—

• (a) in relation to each person who was, at the end of the financial year with which it deals, a director of the society—

• (i) his name;

• (ii) his home address or an address, other than that of the society, at which documents may be served on him;

• (iii) his business occupation;

• (iv) the bodies (other than the society)

of which he is a director, if any;

• (v) his date of birth; and

• (vi) his date of appointment as director; and

• (b) in relation to each person who was, at the end of the financial year with which it deals, an officer (but not a director) of the society—

• (i) his name;

• (ii) his business occupation; and

• (iii) the bodies of which he is a director, if any.

• (2) The annual business statement of a society shall state, in relation to each person who was, at the end of the financial year with which it deals, a director or the chief executive of the society, particulars of his service contract (if any) with the society.

• (3) The annual business statement of a society shall state particulars of any arrangement entered into during the financial year with which it deals whereby—

• (a) a director of the society or a person connected with him acquired, or arranged to acquire, any non-cash asset from a relevant body, or

• (b) a relevant body acquired, or arranged to acquire, any non-cash asset from a director of the society or a person connected with him,

and for the purposes of this subparagraph “non-cash asset” and “connected with” shall be construed in accordance with Part VII (Management of Societies) of the Act, and “relevant body” means the society or any subsidiary undertaking of the society.

Average rates

4

• (1) Subject to the following provisions of this paragraph, the annual business statement of a society shall state the following particulars in respect of the society, in relation to the financial year with which it deals, with regard to each of the major categories of interest bearing assets and liabilities:

• (a) the average amount outstanding during the financial year;

• (b) the interest earned on such assets;

• (c) the interest paid on such liabilities;

• (d) the average yield on such assets; and

• (e) the average rate paid on such liabilities.

• (2) Where the society is a group accounts society, the particulars required to be stated by subparagraph (1) in respect of the society shall be stated in respect of the society and its subsidiary undertakings, but this subparagraph shall not be taken to prohibit the stating in addition by a society of those particulars in relation to the society alone.

• (3) The annual business statement shall include an explanation of what is represented by each of the particulars referred to in subparagraph (1) and, where subparagraph (2) applies, a statement of the basis on which particulars are stated by virtue of that subparagraph.

• (4) In this paragraph—

• (a) the major categories of interest bearing assets are—

• (i) liquid assets, and

• (ii) secured advances;

• (b) the major categories of interest bearing liabilities are—

• (i) retail funds and deposits, and

• (ii) non-retail funds and deposits;

• (c) “the average amount outstanding during the financial year”, in respect of each major category of interest bearing assets and liabilities, shall be calculated on a reasonable basis by reference to the amounts attributable to that balance sheet category throughout that year, and for this purpose the amount attributable to secured advances shall be the aggregate of the amounts in Asset items 2, 3, 4(a) and 4(c) of the balance sheet in Part I, or, in the case when group accounts are used, Part II of Schedule 2;

• (d) “the interest earned”, in respect of each major category of interest bearing assets, means the amount (or aggregate amount) included within interest receivable in the income and expenditure account which is attributable to that category as calculated in accordance with paragraph (c);

• (e) “the interest paid”, in respect of each major category of interest bearing liabilities, means the amount included within interest payable in the income and expenditure account which is attributable to that category as calculated in accordance with paragraph (c);

• (f) “the average yield”, in respect of each major category of interest bearing assets, means the amount (or aggregate amount) in paragraph (d) attributable to that category as a percentage of the amount in paragraph (c) attributable to that category; and

• (g) “the average rate paid”, in respect of each major category of interest bearing liabilities, means the amount in paragraph (e) attributable to that category as a percentage of the amount in paragraph (c) attributable to that category.

• (5) With regard to subparagraph (4)(c), the basis of calculation used in each case shall be stated in the annual business statement.

• (6) In subparagraph (4)(c) “reasonable” shall be defined in accordance with section 74(5) of the Act.

Information about new activities

5

• (1) The annual business statement of a society shall state, in respect of each adopted power of the society which has been exercised by the society for the first time during the financial year with which the annual business statement deals, the fact that it has been so exercised.

• (2) In determining for the purposes of subparagraph (1) whether a power has been exercised by a society, the society shall be treated as including its associated bodies.

SCHEDULE 10 — SUMMARY FINANCIAL STATEMENT

PART I — FORMAT OF SUMMARY FINANCIAL STATEMENT

SECTION A — PRESCRIBED FORM OF STATEMENT FOR THE PURPOSES OF SECTION 76(4) OF THE ACT

1

his summary financial statement is only a summary of information in the annual accounts, directors' report and annual business statement.

2

In so far as this summary financial statement summarises the information in the annual accounts, that information has been audited.

3

The annual accounts, directors' report and annual business statement will be available to members and depositors on demand at every office of [NOTE 1] from/after [NOTE 2] [NOTE 3]. NOTE 1 : Insert name of society. NOTE 2 : Delete as appropriate. NOTE 3 : Insert appropriate date.

SECTION B — FORMAT OF SUMMARY DIRECTORS' REPORT

1

Summary review of the business.

2

Summary review of events.

3

Summary indication of likely developments.

SECTION C — FORMAT OF SUMMARY STATEMENT

RESULTS FOR THE YEAR	THIS YEAR	LAST YEAR
	£	£
NOTE 1 : Delete as appropriate NOTE 2 : Add “and loans” where required for consistency with balance sheet. NOTE 3 : “(including revaluation reserve)” may be deleted where appropriate, or the heading may be replaced by “Revaluation reserve” where the balance sheet in the annual accounts contains no other category of “Other capital”.
1. Profit/Loss [NOTE 1] for the year after taxation
FINANCIAL POSITION AT END OF YEAR
Assets
2. Liquid assets
3. Mortgages
4. Other commercial assets
5. Fixed and other assets
Liabilities
6. Shares
7. Deposits [NOTE 2]
8. Other liabilities
9. Reserves
10. Other capital (including revaluation reserve) [NOTE 3]

SECTION D — FORMAT OF SUMMARY OF KEY FINANCIAL RATIOS

2

As percentage of total assets—

PART II — PROVISIONS APPLICABLE TO PART I

1

n section B of Part I—

• (a) the summary review of the business shall comprise—

• (i) in the case of a single accounts society, a summary review of the business of the society during, and a commentary on its financial position at the end of, the relevant year, and

• (ii) in the case of a group accounts society, a summary review of the business of the society and its subsidiary undertakings during, and a commentary on their financial position at the end of, the relevant year;

• (b) the summary review of events shall comprise a summary review of the events during the relevant year considered by the directors of the society to have an important effect—

• (i) in the case of a single accounts society, on the society, and

• (ii) in the case of a group accounts society, on the society and its subsidiary undertakings; and

• (c) the summary indication of likely developments shall comprise a summary indication of the opinion of the directors of the society as to the developments considered by them to be likely to happen—

• (i) in the case of a single accounts society, in the business of the society, and

• (ii) in the case of a group accounts society, in the business of the society and its subsidiary undertakings.

2

In sections C and D of Part I “year” means “financial year”, “this year” means the relevant year, and “last year” means the financial year preceding the relevant year.

3

Any amount or percentage required to be included in section C or D of Part I in the column headed “LAST YEAR” is required to be included for the purposes of assisting the assessment of the corresponding amount or percentage in the column headed “THIS YEAR” and accordingly shall, where it is derived from an amount in annual accounts adjusted in accordance with Regulation 3(6)(b), be derived from that amount as so adjusted.

4

Sections C and D of Part I shall all be completed—

• (a) in relation to a single accounts society, in relation to the society, and

• (b) in relation to a group accounts society, in relation to the society and its subsidiary undertakings.

5

Subject to paragraph 3, in section C of Part I—

• (a) item 1 shall be derived from item 21 in Part I, or, as the case may be, item 24 in Part II, of Schedule 1,

• (b) item 2 shall be derived from item 1 in Part I, or, as the case may be, Part II, of Schedule 2,

• (c) item 3 shall be derived from items 2 and 3 in Part I, or, as the case may be, Part II, of Schedule 2,

• (d) item 4 shall be derived from item 4 in Part I, or, as the case may be, Part II, of Schedule 2,

• (e) item 5 shall be derived from items 5, 6, 7 and 8 in Part I, or, as the case may be, items 5, 6, 7, 8 and 9 in Part II, of Schedule 2,

• (f) item 6 shall be derived from items 10(a) and 11(d) in Part I, or, as the case may be, items 11(a) and 12(d) in Part II, of Schedule 2,

• (g) item 7 shall be derived from items 10(b) and 11(a) to (c) in Part I, or, as the case may be, items 11(b) and 12(a) to (c) in Part II, of Schedule 2,

• (h) item 8 shall be derived from items 12, 13 and 14 in Part I, or, as the case may be, items 13, 14 and 15 in Part II, of Schedule 2,

• (i) item 9 shall be derived from item 18 in Part I, or, as the case may be, item 19 in Part II of Schedule 2, and

• (j) item 10 shall be derived from items 15, 16 and 17 in Part I, or, as the case may be, items 16, 17, 18 and 20 in Part II, of Schedule 2.

6

Unless there are no extraordinary items in the income and expenditure accounts for the relevant year and the previous financial year, there shall be disclosed in a note to the Summary Statement (the format of which is set out in section C of Part I) whether there are any extraordinary items in the income and expenditure account for the relevant year and, if there are, a summary statement of them.

7

Subject to paragraph 3, in section D of Part I—

• (a) item 1 shall be derived from the particulars required to be stated in the annual business statement by paragraph 2(1)(a) of Schedule 9,

• (b) item 2 shall be derived from the particulars required to be stated in the annual business statement by paragraph 2(1)(b) of Schedule 9, and

• (c) in items 3 and 4—

• (i) where there is no extraordinary profit or loss shown in the income and expenditure account for the relevant year and the previous financial year, item 3(a) and item 4(a) are not required to be included,

• (ii) where item 3(a) and item 4(a) are included, the profit or loss for the year before extraordinary items to be used as a factor in that item shall be derived from item 14 in Part I, or, as the case may be, item 16 in Part II, of Schedule 1,

• (iii) the profit or loss for the year to be used as a factor in item 3(b) and item 4(b) shall be derived from item 21 in Part I, or, as the case may be, item 24 in Part II of Schedule 1,

• (iv) average reserves to be used in calculating items 3(a) and 3(b) shall be determined on an equivalent basis to that used for “mean reserves” for the annual business statement as set out in paragraph 2 of Schedule 9, and

• (v) average total assets to be used in calculating items 4(a) and 4(b) shall be determined on an equivalent basis to that used for “mean total assets” for the annual business statement as set out in paragraph 2 of Schedule 9.

8

The basis used for calculating “average reserves” as defined in paragraph 7(c)(iv) shall be disclosed as a note to the Summary of Key Financial Ratios, the format of which is in section D of Part I of this Schedule.

9

The basis used for calculating “average total assets” as defined in paragraph 7(c)(v) shall be disclosed as a note to the summary of Key Financial Ratios the format of which is in section D of this Schedule.

10

In this Schedule “relevant year”, in relation to a summary financial statement of a society, means the financial year of the society with which the summary financial statement deals.

SCHEDULE 11 — INTERPRETATION OF SCHEDULES

1

The following paragraphs apply for the purposes of the interpretation of the Schedules to these Regulations. Balance sheet date 2. “Balance sheet date”, in relation to a balance sheet, means the date as at which the balance sheet was prepared.

Capital

3

• (1) “Gross capital” means reserves as shown in the balance sheet plus any subordinated liabilities, loan capital, subscribed capital, revaluation reserves and minority interests, where applicable, as shown in the balance sheet.

• (2) “Free capital” means the aggregate of gross capital and general provisions for bad and doubtful debts less intangible fixed assets and tangible fixed assets, as shown in the balance sheet. Leases 4.In respect of leases—

• “long lease” means a lease in the case of which the portion of the term for which it was granted remaining unexpired at the end of the financial year is not less than 50 years, “short lease” means a lease which is not a long lease, and “lease” includes an agreement for a lease. Listed securities 5. “Listed security” means a security listed on a recognised stock exchange or on any stock exchange of repute outside the United Kingdom and the expression “unlisted security” shall be construed accordingly. Loans 6.A loan is treated as falling due for repayment, and an instalment of a loan is treated as falling due for payment, on the earliest date on which the lender could require repayment or (as the case may be) payment, if he exercised all options and rights available to him. Materiality 7.No provision of these Regulations requiring the inclusion of amounts in a particular account, or in notes to the annual accounts (other than paragraphs 4 to 14 and 42 of Schedule 5), shall be taken to prohibit the disregarding of an amount which, in the particular context of that provision, is immaterial.

Participating interest

8

“Participating interest” has the meaning given to that phrase in section 260 of the Companies Act 1985[^f00032].

Provisions

9

• (1) References to provisions for depreciation or diminution in value of assets are to be taken as references to any amount written off by way of providing for depreciation or diminution in value of assets.

• (2) Any reference in an income and expenditure account to the depreciation of, or amounts written off, assets of any description is to be taken as a reference to any provision for depreciation or diminution in value of assets of that description.

• (3) References to provisions for liabilities and charges are to be taken as a reference to any amount retained as reasonably necessary for the purpose of providing for any liability or loss which is either likely to be incurred, or certain to be incurred but uncertain as to amount or as to the date on which it will arise.

Scots land tenure

10

In the application of these Regulations in Scotland, “land of freehold tenure” means land in respect of which the society, (or, as the case may be, a subsidiary undertaking of the society), is the proprietor of the dominium utile or, in the case of land not held on feudal tenure, is the owner, and “land of leasehold tenure” means land of which the society (or, as the case may be, a subsidiary undertaking of the society) is the tenant under a lease.

Staff costs

11

• (1) “Social security costs” means any contribution by the society to any state social security or pension scheme, fund or arrangement.

• (2) “Pension costs” includes any other contributions by the society for the purposes of any pension scheme established for the purpose of providing pensions for persons employed by the society, any sums set aside for that purpose, and any amounts paid by the society in respect of pensions without first being set aside.

• (3) Any amount stated in respect of either of the above items or in respect of the item “wages and salaries” in the society’s income and expenditure account shall be determined by reference to payments made or costs incurred in respect of all persons employed by the society during the financial year.

Amounts repayable

12

Only those amounts which can at any time be withdrawn without notice or for which a maturity or period of notice of twenty-four hours or one working day has been agreed shall be regarded as repayable on demand.

Other definitions

13

In the Schedules to these Regulation—

• “debt securities” means any debt evidenced by any bill of exchange, bond, certificate of deposit, commercial paper, debenture, debenture stock, note or stock which is either listed on a stock exchange, or traded on a money market supervised by a central bank or a government agency of any member State of the European Community or of Canada, Japan, Sweden, Switzerland and the United States of America;

• “financial fixed assets” means securities held as fixed assets; participating interests and shareholdings in subsidiary undertakings shall always be regarded as financial fixed assets;

• “fixed assets” means assets of a society which are intended for use on a continuing basis in the society’s activities, and “current assets” means assets not intended for such use;

• “liquid asset” means an asset which a society is, by virtue of section 21 of the Act (liquid assets) and of regulations for the time being in force under that section empowered to hold for the purpose of meeting its liabilities as they arise;

• “retail funds and deposits” means those funds and deposits of a society which— come within section 7 (power to raise funds and borrow money) of the Act, and are not, by virtue of that section, classified as non-retail funds and deposits, and includes, in the case of a society which has made an effective election for the purposes of subsection (5) of that section, those funds and deposits which would, but for that election, be classified as non-retail;

• “sale and repurchase transaction” means a transaction which involves the transfer by a credit institution or a customer (the “transferor”) to another credit institution or customer (the “transferee”) of assets subject to an agreement that the same assets, or, in the case of fungible assets, equivalent assets will subsequently be transferred back to the transferor at a specified price on a date specified or to be specified by the transferor; but forward exchange transactions, options, transactions involving the issue of debt securities with a commitment to repurchase all or part of the issue before maturity or any similar transactions shall not be regarded as sale and repurchase transactions;

• “subordinated loan capital” means, in respect of a society, any liability (not being a liability in respect of a share) specified in an order for the time being in force under section 45(5) of the Act (capital resources which may be aggregated with reserves for certain purposes);

• “third party” means a person who is neither the society nor a body corporate associated with it; and “undertaking” has the meaning given to that word in section 259(1) of the Companies Act 1985.[^f00034]

Signed

In witness whereof the common seal of the Building Societies Commission is hereto fixed, and is authenticated by me, a person authorised under paragraph 14 of Schedule 1 to the Building Societies Act 1986, on 13th February 1992.

Norman Digance — Secretary to the Commission

We consent to this Order.

Sydney Chapman — Gregory Knight — Two of the Lords Commissioners of Her Majesty’s Treasury — 17th February 1992

Explanatory note

(This note is not part of the Regulations)

These Regulations revoke and replace with effect 1st January 1993 the Building Societies (Accounts and Related Provisions) Regulations 1987. They prescribe the format and content of the annual accounts which must be prepared in respect of building societies or of building societies and their subsidiary undertakings as a whole, as appropriate. These accounts comprise an income and expenditure account, a balance sheet and a statement of the source and application of funds; there is also provision for notes to the annual accounts and accounting principles and rules.

The new Regulations are required principally in order to implement Council Directive 86/635/EEC[^f00035] on the Annual Accounts and Consolidated Accounts of Banks and Other Financial Institutions, in so far as that Directive is applicable to building societies to which Part VIII of the Building Societies Act 1986 applies.

The principal changes effected as a result of the Directive are—

• (i) the introduction in Schedule 4 to the Regulations of rules concerning the methods to be used in producing consolidated accounts, which to a large extent reflect existing accounting practices;

• (ii) a requirement for societies to use the interim accounts of subsidiary undertakings for the purpose of preparing group accounts, where the last financial year end of the subsidiary undertaking is more than 3 months before the year end of the society;

• (iii) the introduction in Schedule 6 to the Regulations of detailed disclosure requirements in respect of subsidiary undertakings and other associated bodies, the requirements to a large extent reflect existing accounting practice;

• (iv) the introduction of rules regarding the accounting for transactions denominated in foreign currencies;

• (v) a requirement to analyse various categories of commercial assets according to their maturity;

• (vi) the introduction of detailed rules regarding the valuation of liquid assets, with the method of valuation in respect of transferable securities being dependent on whether the securities are financial fixed assets (ie intended for use on a continuing basis in the normal course of the society’s activities) or otherwise;

• (vii) a requirement to include certain commitments and contingencies on the balance sheet as memorandum items, together with increased disclosure requirements in the notes to the accounts in respect of such items.

The Regulations make a number of relatively minor changes to correct anomalies in the Regulations being revoked and to reflect parallel changes in the requirements for companies : the principal such changes are—

• (i) the amendment of the profit ratio shown in the Summary Financial Statement so that it is based on average mean reserves and not average gross capital, and is shown on a consistent basis with the more appropriate ratio given in the Annual Business Statement;

• (ii) the removal of the prescribed method for calculating average balances for determining the ratios required for the Annual Business Statement. Average balances will henceforth be calculated on a “reasonable” basis, with disclosure of the basis used being required.

• (iii) the addition of a requirement that profits and losses on financial transactions which are similar in nature to interest and spread over the actual duration of the contract involved, be included within “interest payable” or “interest receivable” in the income and expenditure account. All other income from financial instruments will continue to be included within “other income and charges”;

• (iv) a requirement that payments to appointed agencies be included within “adminis trative expenses”.

Footnotes

[^f00001]: 1986 c. 53.

[^f00002]: Schedule 4A to the Companies Act 1985 (1985 c. 6) was inserted by section 5(2) of and Schedule 2 to the Companies Act 1989 (1989 c. 40).

[^f00003]: Section 72 was amended by S.I. 1991/1729.

[^f00004]: Section 258 of the Companies Act 1985 (1985 c. 6.) was inserted by sections 1 and 21 of the Companies Act 1989 (1989 c. 40).

[^f00005]: S.I. 1991/1729.

[^f00006]: 1987 c. 22.

[^f00007]: Section 258 of the Companies Act 1985 was inserted by sections 1 and 21 of the Companies Act 1989.

[^f00008]: S.I. 1987/2072.

[^f00011]: 1973 c. 65.

[^f00012]: 1972 c. 9. (NI)

[^f00013]: 1964 c. 48.

[^f00014]: 1985 c. 51.

[^f00015]: 1968 c. 73.

[^f00016]: S.I. 1987/1975.

[^f00017]: S.I. 1988/1141.

[^f00018]: S.I. 1989/730.

[^f00019]: S.I. 1988/1141.

[^f00020]: Section 7 of the Building Societies Act 1986 has been amended by SI 1987/378, 1670 and SI 1990/2363.

[^f00021]: S.I. 1989/208. This Order was revoked by S.I. 1991/702 but the right of certain shares to be aggregated was retained by Article 3 of the revoking Order.

[^f00022]: S.I. 1991/702.

[^f00023]: Schedule 4A was inserted into the Companies Act 1985 (1985 c. 6) by sections 1 and 5(2) of and Schedule 2 to the Companies Act 1989 (1989 c. 40) but the relevant provisions are subject to paragraph 7 of Part I of Schedule 2 to the Companies Act 1989 (Commencement No. 4 and Transitional and Saving Provisions) Order 1990 (S.I. 1990/355).

[^f00024]: 1986 c. 60.

[^f00025]: 1985 c. 6.

[^f00026]: SI 1986/1032 (N.I.6). This Order was amended by The Companies (Northern Ireland) Order 1990 (SI 1990/593 N.I.5)).

[^f00027]: 1985 c. 6.

[^f00028]: S.I. 1986/1032 (N.I.6). This Order was amended by The Companies (Northern Ireland) Order 1990 (S.I. 1990/593 (N.I.5)..

[^f00029]: Section 258 was applied to the interpretation of subsidiary undertakings of building societies by the Building Societies Act 1986 (Modifications) Order 1991 (S.I. 1991/1729).

[^f00030]: 1944 c. 10.

[^f00031]: 1945 c. 6 (N.I.).

[^f00032]: 1985 c. 6. Section 260 of the Companies Act 1985 was inserted by section 22 of the Companies Act 1989.

[^f00034]: Section 259 of the Companies Act 1985 (c. 6.) was inserted by section 1 and 22 of the Companies Act 1989 (c. 40).

[^f00035]: O.J. L.372 of 31.12.86.