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The Friendly Societies (Accounts and Related Provisions) Regulations 1994

Type Statutory-Instrument

Publication 1994-07-20

Last updated 2020-12-31

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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Made: 20th July 1994

Laid before Parliament: 1st August 1994

Coming into force: 1st September 1994

The Friendly Societies Commission, with the consent of the Treasury, in exercise of the powers conferred on it by sections 70 and 71 of, and paragraph 17 of Schedule 14 to, the Friendly Societies Act 1992[^f00001], and of all other powers enabling it in that behalf, hereby makes the following Regulations:

PART I — PRELIMINARY

Citation and commencement

1

These Regulations may be cited as the Friendly Societies (Accounts and Related Provisions) Regulations 1994, and shall come into force on 1st September 1994.

Interpretation

2

(1) In these Regulations:

“the Act” means the Friendly Societies Act 1992;

“associated body”, in relation to a society, means a body in which the society holds shares or corresponding membership rights;

“general business” has the same meaning as in the Act;

“group accounts society” means a society the committee of management of which is obliged by section 69E of the Act (duty to prepare accounts) to prepare group accounts;

“long term business” has the same meaning as in the Act;

“long term fund” means the fund or funds maintained by a society in respect of its long term business in accordance with the provisions of the Act;

“member” has the same meaning as in the Act;

“non-directive society” means a friendly society to which section 37(2) or (3) of the Act does not apply, which is a registered society and which does not carry on reinsurance business;

“particular account” means an income and expenditure account or a balance sheet;

“policy holder”, in relation to a subsidiary or a jointly controlled body of a friendly society, has the same meaning as in any order made under section 424(2) of the Financial Services and Markets Act 2000 and for the time being in force;

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

“society” means a friendly society—to which section 37(2) or (3) of the Act applies,which is an incorporated friendly society, orwhich carries on reinsurance business; and

“subsidiary” means a subsidiary of a group accounts society with which the group accounts of the society are required by section 69E of the Act to deal;

(2) Where a society or a non-directive society (in this paragraph referred to as a central office) has registered branches, a requirement in these Regulations in respect of a society or a non-directive society is, except where it is expressly otherwise provided, a requirement which the central office and the registered branch must each comply with as if each of them is a society or a non-directive society.

(3) Nothing in these Regulations is to 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.

Application

3

The Regulations apply to the accounts and reports (as specified in regulations 4, 5, 11 and 12) of every society to which Part VI of the Act applies in respect of any financial year of the society ending on or after 31st December 1995.

PART II— — ACCOUNTS

Annual accounts—single accounts society

4

In respect of the annual accounts of a single accounts society:

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

(b) every balance sheet must be prepared in the format set out in Part I of Schedule 2.

Annual accounts—group accounts society

5

In respect of the annual accounts of a group accounts society:

(a) the provisions of this regulation apply subject to the provisions of regulation 7 below, the supplementary provisions of which also have effect in relation to those accounts; and

(b) within those accounts:

(i) every income and expenditure account relating to the society must 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 subsidiaries must be prepared on a consolidated basis in the format set out in Part I of Schedule 1 with the modifications specified in Part II of that Schedule;

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

(iv) every balance sheet relating to the society and its subsidiaries must be prepared on a consolidated basis in the format set out in Part I of Schedule 2 with the modifications specified in Part II of that Schedule.

Content and form of accounts

6

(1) An income and expenditure account and balance sheet referred to in regulations 4, 5 and 11 must be prepared in accordance with the relevant notes and every such document must, 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) Regulations 4, 5 and 11 are not to be read as:

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

(b) prohibiting the showing of any item in a particular account in greater detail than is required by the format for that particular account; or

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

(3) Items preceded by lower case letter in any format set out in Schedule 1, 2 or 7 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 any income and expenditure account, the income and expenditure of the society (or, as the case may be, the society and its subsidiaries) 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 subsidiaries) as at the end of that year; or

(b) their combination facilitates that assessment,

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

(4) Subject to paragraph (5) below, a heading or sub-heading for an item contained in any format set out in Schedule 1, 2 or 7 must 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).

(5) 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 and income and expenditure account, the corresponding amount for the preceding financial year must 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 must be adjusted and particulars of the adjustment and the reasons for it must be disclosed in a note to the annual accounts; and

(c) paragraph (4) above does not apply in any case where an amount can be shown for the item to which the heading or sub-heading relates in respect of the preceding financial year, and in such a case that amount must be shown under the heading or sub-heading required for that item.

(6) Subject to the provisions of Schedules 1, 2 and 7, amounts in respect of items representing assets or income may not be set off against amounts in respect of items representing liabilities or expenditure (as the case may be), or vice versa.

(7) In this regulation, “the relevant notes” means, in relation to any particular account, Part III of Schedule 1, Part III and Part IV of Schedule 2 or Part III of Schedule 7, whichever is applicable.

Group accounts—supplementary provisions

7

(1) The annual accounts of a group accounts society must comply with the further provisions of Schedule 3 as to the form and content of the consolidated income and expenditure account and the balance sheet, 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 subsidiaries of the society must be included in the consolidated income and expenditure account and the balance sheet as required by Regulation 5, and in the notes to the accounts in respect of the society and its subsidiaries in combination, as required by regulation 8(2)(b).

(3) A subsidiary 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 subsidiaries as a whole, of the matters set out in subsection (2) of section 69F of the Act.

(4) If a society has two or more subsidiaries, 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) Each particular account which is a group account must combine the information contained in the particular account of the society and the accounts of its subsidiaries from which it is derived, adjusted so far as is necessary to consolidate those accounts.

(6) In the group accounts, the interest of the society in a jointly controlled body and the amount of profit or loss attributable to such an interest, must be shown by the equity method of accounting (which must include dealing with any goodwill arising in accordance with paragraphs 19 to 22 and 24 of Schedule 6).

(7) The equity method of accounting referred to in paragraph (6) 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 subsidiaries as a whole, of the matters set out in subsection (2) of section 69F of the Act.

Notes to annual accounts

8

(1) The annual accounts of a single accounts society must, subject to paragraph (6) below, include notes to them containing the material specified, and set out in the manner specified, in Schedule 4 below, as well as the notes required to be included by other provisions of these Regulations.

(2) The annual accounts of a group accounts society must, subject to paragraph (6) below and any provision in Schedule 4 below which indicates otherwise, include notes to them containing:

(a) in respect of the society; and

(b) in respect of the society and its subsidiaries in combination,

the material specified, and set out in the manner specified, in Schedule 4 below, as well as the notes required to be included by other provisions of these Regulations.

(3) For the purposes of paragraph (2)(b) above:

(a) any reference in ... Schedule 4 below to a society must be taken as a reference to the society and its subsidiaries in combination; and

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

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The annual accounts of a non-directive society must include notes to them containing the material from Schedule 4 below as is specified in Part II of Schedule 7 below, (and such material must be, as far as is possible, set out in the manner specified in Schedule 4 below), as well as the notes required to be included by other provisions of these Regulations and in the application of the Schedule to a non-directive society, references in the Schedule to a society are, where appropriate, to be construed as references to a non-directive society.

(6) Paragraphs (1), (2) and (5) above 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

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting principles and rules

10

(1) A society must prepare its annual accounts in accordance with the accounting principles and rules set out in Schedule 6.

(2) A non-directive society must prepare its annual accounts in accordance with the accounting principles and rules set out in Parts I and II of Schedule 6 and in the application of those Parts of the Schedule to a non-directive society, references in those Parts to a society are, where appropriate, to be construed as references to a non-directive society.

Annual accounts—non-directive society

11

In respect of the annual accounts of a non-directive society:

(a) every income and expenditure account must be prepared in the format set out in Part I of Schedule 7;

(b) every balance sheet must be prepared in the format set out in Part II of Schedule 7; and

(c) such accounts must be prepared in accordance with the requirements set out in regulation 8 above as modified in Part III of Schedule 7.

PART III— — COMMITTEE OF MANAGEMENT'S ANNUAL REPORT

Committee of management’s annual report

12

(1) Each committee of management’s annual report of a society prepared under section 71 of the Act (Report of the committee of management of a friendly society on the society’s affairs) must contain, in addition to the other matters required to be contained in it by the Act, the material specified in Part I of Schedule 8.

(2) Each committee of management’s annual report of a non-directive society prepared under section 71 of the Act (Report of the committee of management of a friendly society on the society’s affairs) must contain the material specified in Part I of Schedule 8 as modified by Part II of the Schedule 8.

PART IV— — MISCELLANEOUS AND GENERAL

Transitional provisions

13

(1) A society may, with respect to a financial year preceding the financial year of the society to which these Regulations first apply, prepare such annual accounts as it would have been required to prepare had these Regulations not been made.

(2) Where any provision of these Regulations requires the recording of a particular item during or as at the end of a previous financial year, and where:

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

(b) 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 must be identified and so recorded, but if the records of the society are not so kept, it must be included on the basis of an estimate.

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

Interpretation of Schedules

14

Schedule 9 has effect for the interpretation of the Schedules to these Regulations.

SCHEDULE 1

PART I — INCOME AND EXPENDITURE ACCOUNT FORMAT

I. — Technical account—General business

1

Earned premiums, net of reinsurance

(a) gross premiums written (1)

(b) outward reinsurance premiums (2)

(d) change in the provision for unearned premiums, reinsurers' share

2

Allocated investment return transferred from the non-technical account (item III.6) (10)

2a

Investment income (8)(10)

(a) income from shares in subsidiaries

(b) income from other investments with a separate indication of that derived from jointly controlled bodies

(aa) income from land and buildings

(bb) income from other investments

(d) gains on the realisation of investments

3

Other technical income, net of reinsurance

4

Claims incurred, net of reinsurance (4)

(a) claims paid

(aa) gross amount

(bb) reinsurers' share

(b) change in the provision for claims

(aa) gross amount

(bb) reinsurers' share

5

Change in other technical provisions, net of reinsurance, not shown under other headings

6

Bonuses and rebates, net of reinsurance (5)

7

Net operating expenses

(a) acquisition costs (6)

(b) change in deferred acquisition costs

(d) reinsurance commissions and profit participation

8

Other technical charges, net of reinsurance

9

Investment expenses and charges (8)

(a) investment management expenses, including interest

(b) value adjustments on investments

10

Sub-total (balance on the technical account for general business) (item III.1)

II. — Technical account—Long term business

1

Earned premiums, net of reinsurance

(a) gross premiums written (1)

(b) outward reinsurance premiums (2)

2

Investment income (8)(10)

(a) income from shares in subsidiaries

(b) income from other investments with a separate indication of that derived from jointly controlled bodies

(aa) income from land and buildings

(bb) income from other investments

(d) gains on the realisation of investments

3

Unrealised gains on investments (9)

4

Other technical income, net of reinsurance

5

Claims incurred, net of reinsurance (4)

(a) claims paid

(aa) gross amount

(bb) reinsurers' share

(b) change in the provision for claims

(aa) gross amount

(bb) reinsurers' share

6

Change in other technical provisions, net of reinsurance, not shown under other headings

(a) long term business provision, net of reinsurance (3)

(aa) gross amount

(bb) reinsurers' share

(b) other technical provisions, net of reinsurance

7

Bonuses and rebates, net of reinsurance (5)

8

Net operating expenses

(a) acquisition costs (6)

(b) change in deferred acquisition costs

(d) reinsurance commissions and profit participation

9

Investment expenses and charges (8)

(a) investment management expenses, including interest

(b) value adjustments on investments

10

Unrealised losses on investments (9)

11

Other technical charges, net of reinsurance

11a

Tax attributable to the long term business

12

Allocated investment return transferred to the non-technical account (item III.4)

12a

Transfers to or from the fund for future appropriations

13

Sub-total (balance on the technical account—long term business) (item III.2)

III. — Non-technical account

1

Balance on the general business technical account—(item I.10)

2

Balance on the long term business technical account—(item II.13)

3

Investment income (8)

(a) income from shares in subsidiaries

(b) income from other investments with a separate indication of that derived from jointly controlled bodies

(aa) income from land and buildings

(bb) income from other investments

(d) gains on the realisation of investments

3a

Unrealised gains on investments (9)

4

Allocated investment return transferred from the long term business technical account (item II.12) (10)

5

Investment expenses and charges (8)

(a) investment management expenses, including interest

(b) value adjustments on investments

5a

Unrealised losses on investments (9)

6

Allocated investment return transferred to the general business technical account (item I.2)(10)

7

Other income

8

Other charges, including value adjustments

8a

Excess of income over expenditure on ordinary activities before tax

9

Tax on excess of income over expenditure on ordinary activities

10

Excess of income over expenditure on ordinary activities after tax

11

Extraordinary income

12

Extraordinary charges

13

Extraordinary gain or loss

14

Tax on extraordinary gain or loss

15

Other taxes not shown under the preceding items

16

Excess of income over expenditure for the financial year

PART II — FORMAT OF CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT

The modifications to Part I of this Schedule for the format of a consolidated income and expenditure account are as follows:

(1) Items I.2a(a), II.2(a) and III.3(a) (income from shares in subsidiaries) must be omitted.

(2) Items III.10 (Excess of income over expenditure on ordinary activities after tax) must be replaced by the following items:

(III.10a) Excess of income over expenditure on ordinary activities after tax

(III.10b) Minority Interests.

(3) Items III.14 (Tax on extraordinary gain or loss) must be replaced by the following items:

(III.14a) Tax on extraordinary gain or loss

(III.14b) Extraordinary gain or loss after tax

(III.14c) Minority interests in extraordinary gain or loss after tax.

(4) In the case of general business, investment income expenses and charges may be disclosed in the non-technical account rather than in the technical account.

(5) In the case of subsidiaries which are not authorised to carry on long term business in United Kingdom, notes (8) and (9) to the income and expenditure account format have effect as if references to investment income, expenses and charges arising in the long term fund or to investments attributed to the long term fund were references to investment income, expenses and charges or (as the case may be) investments relating to long term business.

(6) In the case of subsidiaries which do not have a head office in United Kingdom, the computation required by paragraph 37 of Schedule 6 must be made annually by an actuary or other specialist in the field on the basis of recognised actuarial methods.

(7) The information required by paragraphs 26 to 29 of Schedule 4 need not be shown.

PART III — NOTES ON THE INCOME AND EXPENDITURE FORMAT

(1) Gross premiums written

(General business technical account: item I.1.(a)

Long term business technical account: item II.1.(a))

This item must comprise all amounts due during the financial year in respect of insurance contracts entered into regardless of the fact that such amounts may relate in whole or in part to a later financial year, and must include inter alia:premiums yet to be determined, where the premium calculation can be done only at the end of the year;single premiums, including annuity premiums, and, in long term business, single premiums resulting from bonus and rebate provisions in so far as they must be considered as premiums under the terms of the contract;additional premiums in the case of half-yearly, quarterly or monthly payments and additional payments from members or policy holders for expenses borne by the society;in the case of co-insurance, the society’s portion of total premiums;reinsurance premiums due from ceding and retroceding insurance undertakings, including portfolio entries, after deduction of cancellations and portfolio withdrawals credited to ceding and retroceding insurance undertakings.The above amounts must not include the amounts of taxes or duties levied with premiums.

(2) Outward reinsurance premiums

(General business technical account; item I.1.(b)

Long term business technical account: item II.1(b))

This item must comprise all premiums paid or payable in respect of outward reinsurance contracts entered into by the society. Portfolio entries payable on the conclusion or amendment of outward reinsurance contracts must be added; portfolio withdrawals receivable must be deducted.

(3) Change in the provision for unearned premiums, net of reinsurance

(Long term business technical account: items II.1.(c) and II.6.(a))

In the case of long term business, the change in unearned premiums may be included either in item II.1.(c) or in item II.6.(a) of the long term business technical account.

(4) Claims incurred, net of reinsurance

(General business technical account: item I.4

Long term business technical account: item II.5)

This item must comprise all payments made in respect of the financial year with the addition of the provision for claims (but after deducting the provision for claims for the preceding financial year).

These amounts must include annuities, surrenders, entries and withdrawals of loss provisions to and from ceding insurance undertakings and reinsurers and external and internal claims management costs and charges for claims incurred but not reported such as are referred to in paragraphs 38(2) and 40 of Schedule 6 below.

Sums recoverable on the basis of subrogation and salvage (within the meaning of paragraph 38 of Schedule 6 (below) must be deducted.

Where the difference between:the loss provision made at the beginning of the year for outstanding claims incurred in previous years; andthe payments made during the year on account of claims incurred in previous years and the loss provision shown at the end of the year for such outstanding claims,is material, it must be shown in the notes to the accounts, broken down by category and amount.

(5) Bonuses and rebates, net of reinsurance

(General business technical account: item I.6

Long term business technical: item II.7)

Bonuses must comprise all amounts chargeable for the financial year which are paid or payable to members and, policy holders, other insured parties or provided for their benefit, including amounts used to increase technical provisions or applied to the reduction of future premiums, to the extent that such amounts represent an allocation of surplus or income arising on business as a whole or a section of business, after deduction of amounts provided in previous years which are no longer required.

Rebates must comprise such amounts to the extent that they represent a partial refund of premiums resulting from the experience of individual contracts.

Where material, the amount charged for bonuses and that charged for rebates must be disclosed separately in the notes to the accounts.

Acquisition costs6(General business technical account: item I.7.(a)Long term business technical account: item II.8.(a))This item must comprise the costs arising from the conclusion of insurance contracts. They must cover both direct costs, such as acquisition commissions or the cost of drawing up the insurance document or including the insurance contract in the portfolio, and indirect costs, such as advertising costs or the administrative expenses connected with the processing of proposals and the issuing of policies.In the case of long term business, policy renewal commissions must be included under item II.8.(c) in the long term business technical account.

(7) Administrative expenses

(General business technical account: item I.7.(c)

Long term business technical account: item II.8.(c))

This item must include the costs arising from premium collection, portfolio administration, handling of bonuses and rebates, and inward and outward reinsurance. They must in particular include staff costs and depreciation provisions in respect of office furniture and equipment in so far as these need not be shown under acquisition costs, claims incurred or investment charges. Item II.8.(c) must also include policy renewal commissions.

(8) Investment income, expenses and charges

(General business technical account: items I.2a and 9

Long term business technical account: items II.2 and 9

Non-technical account: items III.3 and 5)

Investment income, expenses and charges must, to the extent that they arise in the long term fund, be disclosed in the long term business technical account. Other investment income, expenses and charges must either be disclosed in the non-technical account or attributed between the appropriate technical and non-technical accounts. Where the society makes such an attribution it must disclose the basis for it in the notes to the accounts.

(9) Unrealised gains and losses on investments

(Long term business technical account: items II.3 and 10

Non-technical account: items III.3a and 5a)

In the case of investments attributed to the long term fund, the difference between the valuation of the investments and their purchase price or, if they have previously been valued, their valuation as at the last balance sheet date, may be disclosed (in whole or in part) in item II.3 or II.10 (as the case may be) of the long term business technical account, and in the case of investments shown as assets under Assets item D (assets held to cover linked liabilities) must be so disclosed.

In the case of other investments, the difference between the valuation of the investments and their purchase price or, if they have previously been valued, their valuation as at the last balance sheet date, may be disclosed (in whole or in part) in item III.3a or III.5a (as the case may require) of the non-technical account.

(10) Allocated investment return

(General business technical account: items I.2 and 2a

Long term business technical account: item II.2

Non-technical account: items III.4 and 6)

The allocated return may be transferred from one part of the income and expenditure account to another.

Where part of the investment return is transferred to the general business technical account, the transfer from the non-technical account must be deducted from item III.6 and added to item I.2. Where part of the investment return disclosed in the long term business technical account is transferred to the non-technical account, the transfer to the non-technical account must be deducted from item II.12 and added to item III.4.

The reasons for such transfers (which may consist of a reference to any relevant statutory requirement) and the bases on which they are made must be disclosed in the notes to the accounts.

SCHEDULE 2

PART I — BALANCE SHEET FORMAT

ASSETS

Intangible assets

A

(1) Development costs

(2) Concessions, patents, licences, trade marks and similar rights and assets (1)

(3) Goodwill (2)

(4) Payments on account

Investments

B

(I) Land and buildings (3)

(II) Investments in associated bodies

(1) Investments in subsidiaries

(a) Shares

(b) Loans

(2) Investments in jointly controlled bodies

(a) Shares

(b) Loans

(3) Significant investments in other associated bodies (4)

(a) Shares

(b) Loans

(III) Other financial investments

(1) Shares and other variable-yield securities and units in unit trusts

(2) Debt securities and other fixed income securities (5)

(3) Participation in investment pools (6)

(4) Loans secured by mortgages (7)

(5) Other loans (7)

(6) Deposits with credit institutions (8)

(7) Other (9)

(IV) Deposits with ceding undertakings (10)

Assets held to cover linked liabilities (11)

C

D

Debtors (13)

E

(I) Debtors arising out of direct insurance operations

(1) Members or policyholders

(2) Intermediaries

(II) Debtors arising out of reinsurance operations

(III) Other debtors

Other assets

F

(I) Tangible assets

(1) Fixtures, fittings, tools and equipment

(2) Payments on account (other than deposits paid on land and buildings) and assets (other than buildings) in course of construction

(II) Stocks

(1) Raw materials and consumables

(2) Work in progress

(3) Finished goods and goods for resale

(4) Payments on account

(III) Cash at bank and in hand

(IV) Other (14)

Prepayments and accrued income

G

(I) Accrued interest and rent (15)

(II) Deferred acquisition costs (16)

(III) Other prepayments and accrued income

LIABILITIES

Reserves

A

(I) Revaluation reserve

(II) Reserves provided for by the rules and tables

(III) Other reserves

Subordinated liabilities (17)

B

Fund for future appropriations (18)

Ba

Technical provisions

C

(1) Provision for unearned premiums (19)

(a) gross amount

(b) reinsurance amount (12)

(2) Long term business provision (19)(20)(24)

(a) gross amount

(b) reinsurance amount (12)

(3) Claims outstanding (21)

(a) gross amount

(b) reinsurance amount (12)

(4) Provision for bonuses and rebates (22)

(a) gross amount

(b) reinsurance amount (12)

(5) Other technical provisions (23)

(a) gross amount

(b) reinsurance amount (12)

Technical provisions for linked liabilities (24)

D

(a) gross amount

(b) reinsurance amount (12)

Provisions for other risks and charges

E

(1) Provisions for pensions and similar obligations

(2) Provisions for taxation

(3) Other provisions

Deposits received from reinsurers (25)

F

Creditors (26)

G

(I) Creditors arising out of direct insurance operations

(II) Creditors arising out of reinsurance operations

(III) Debenture loans (27)

(IV) Amounts owed to credit institutions

(V) Other creditors including taxation and social security

Accruals and deferred income

H

PART II — FORMAT OF CONSOLIDATED BALANCE SHEET

The modifications to Part I of this Schedule for the format of a consolidated balance sheet are as follows:

(1) Assets items B.II.1.(a) and (b) (Investments in subsidiaries, (a) shares and (b) loans) must be omitted.

(2) After Liabilities item A.III. (Other reserves) there must be inserted the following new item: “IV. Minority interests”.

(3) The information required by paragraph 1 of Part IV of this Schedule need not be given.

PART III — NOTES ON THE BALANCE SHEET FORMAT

(1) Concessions, patents, licences, trade marks and similar rights and assets

(Assets item A.2)

Amounts in respect of assets must only be included in a society’s balance sheet under this item if either:the assets were acquired for valuable consideration and are not required to be shown under goodwill; orthe assets in question were created by the society itself.

(2) Goodwill

(Assets item A.3)

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

(3) Land and buildings

(Assets item B.I)

The amount of any land and buildings occupied by the society for its own activities must be shown separately in the notes to the accounts.

(4) Significant investments in other associated bodies

(Asset item B.II.3)

An investment is significant if it falls within the description in paragraph 5(2) of Schedule 13E to the Act.

(5) Debt securities and other fixed income securities

(Assets item B.III.2)

This item must comprise transferable debt securities and any other transferable fixed income securities issued by credit institutions, other undertakings or public bodies, in so far as they are not covered by Assets item B.II.1.(b), B.II.2.(b) or B.II.3.(b).

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, must also be regarded as debt securities and other fixed income securities and so be included under this item.

(6) Participation in investment pools

(Assets item B.III.3)

This item must comprise shares held by the society in joint investments constituted by several undertakings or pension funds, the management of which has been entrusted to one of those undertakings or to one of those pension funds.

(7) Loans secured by mortgages and other loans

(Assets items B.III.4 and B.III.5)

Loans to members or policy holders for which the policy is the main security must be included under “Other loans” and their amount must be disclosed in the notes to the accounts. Loans secured by mortgage must be shown as such even where they also secured by insurance policies. Where the amount of “Other loans” not secured by policies is material, an appropriate breakdown must be given in the notes to the accounts.

(8) Deposits with credit institutions

(Assets item B.III.6)

This item must comprise sums the withdrawal of which is subject to a time restriction. Sums deposited with no such restriction must be shown under Assets item F.III even if they bear interest.

(9) Other

(Assets item B.III.7)

This item must comprise those investments which are not covered by Assets items B.III.1 to 6. Where the amount of such investments is significant, they must be disclosed in the notes to the accounts.

(10) Deposits with ceding undertakings

(Assets item B.IV)

Where the society accepts reinsurance this item must comprise amounts, owed by the ceding undertakings and corresponding to guarantees, which are deposited with those ceding undertakings or with third parties or which are retained by those undertakings.

These amounts may not be combined with other amounts owed by the ceding insurer to the reinsurer or set off against amounts owed by the reinsurer to the ceding insurer.

Securities deposited with ceding undertakings or third parties which remain the property of the society must be entered in the society’s accounts as an investment, under the appropriate item.

(11) Assets held to cover linked liabilities

(Assets item C)

In respect of long term business, this item must comprise investments made pursuant to long term policies under which the benefits payable to the member or policy holders are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified).

This item must also comprise investments which are held on behalf of the members or policy holders of a tontine and are intended for distribution among them.

(12) Reinsurance amounts

(Assets item D: Liabilities items C.1(b), 2(b), 3(b), 4(b) and 5(b) and D(b))

The reinsurance amounts may be shown either under Assets item D or under Liabilities items C.1(b), 2(b), 3(b), 4(b) and 5(b) and D(b).

The reinsurance amounts must comprise the actual or estimated amounts which, under contractual reinsurance arrangements, are deducted from the gross amounts of technical provisions.

As regards the provision for unearned premiums, the reinsurance amounts must be calculated according to the methods referred to in paragraph 35 of Schedule 6 below or in accordance with the terms of the reinsurance policy.

(13) Debtors

(Assets item E)

Amounts owed by jointly controlled bodies and subsidiaries must be shown separately as sub-items of Assets E.I, II and III.

(14) Other

(Asset item F.IV)

This item must comprise those assets which are not covered by Assets items F.I to III. Where such assets are material they must be disclosed in the notes to the accounts.

(15) Accrued interest and rent

(Assets item G.I)

This item must comprise those items that represent interest and rent that have been earned up to the balance-sheet date but have not yet become receivable.

(16) Deferred acquisition costs

(Assets item G.II)

This item must comprise the costs of acquiring insurance policies which are incurred during a financial year but relate to a subsequent financial year (“deferred acquisition costs”), except in so far as:allowance has been made in the computation of the long term business provision made under paragraph 37 of Schedule 6 below and shown under Liabilities item C2 or D in the balance sheet, for:the explicit recognition of such costs; orthe implicit recognition of such costs by virtue of the anticipation of future income from which such costs may prudently be expected to be recovered; orallowance has been made for such costs in respect of general business policies by a deduction from the provision for unearned premiums made under paragraph 35 of Schedule 6 below and shown under Liabilities item C.1 in the balance sheet.

Deferred acquisition costs arising in general business must be distinguished from those arising in long term business.

In the case of general business, the amount of any deferred acquisition costs must be established on a basis compatible with that used for unearned premiums.

There must be disclosed in the notes to the accounts how the deferral of acquisition costs has been treated (unless otherwise expressly stated in the accounts), and:where such costs are included as a deduction from the provisions at Liabilities item C.1, the amount of such deduction; orwhere the actuarial method used in the calculation of the provisions at Liabilities item C.2 or D has made allowance for the explicit recognition of such costs, the amount of the costs so recognised.

(17) Subordinated liabilities

(Liabilities item B)

This item must comprise all liabilities in respect of which there is a contractual obligation that, in the event of winding up or of dissolution, they are to be repaid only after the claims of all other creditors have been met (whether or not they are represented by certificates).

(18) Fund for future appropriations

(Liabilities item Ba)

This item must comprise all funds the allocation of which to members or policy holders has not been determined by the end of the financial year.

Transfers to and from this item must be shown in item II.12a in the income and expenditure account.

(19) Provision for unearned premiums

(Liabilities item C.1)

In the case of long term business the provision for unearned premiums may be included in Liabilities item C.2 rather than in this item.

The provision for unearned premiums must comprise the amount representing that part of gross premiums written which is estimated to be earned in the following financial year or to subsequent financial years.

(20) Long term business provision

(Liabilities item C.2)

This item must comprise the actuarially estimated value of the society’s liabilities (excluding technical provisions included in Liabilities item D), including bonuses already declared and after deducting the actuarial value of future premiums.

This item must also comprise claims incurred but not reported, plus the estimated costs of settling such claims.

(21) Claims outstanding

(Liabilities item C.3)

This item must comprise the total estimated ultimate cost to the society of settling all claims arising from events which have occurred up to the end of the financial year (including, in the case of general business, claims incurred but not reported) less amounts already paid in respect of such claims.

(22) Provision for bonuses and rebates

(Liabilities item C.4)

This item must comprise amounts intended for members or policy holders by way of bonuses and rebates as defined in Note (5) on the income and expenditure account format to the extent that such amounts have not been credited to members or policy holders, or included in Liabilities item Ba or in Liabilities item C.2.

(23) Other technical provisions

(Liabilities item C.5)

This item must comprise, inter alia, the provision for unexpired risks as defined in paragraph 8 of Schedule 9 below. Where the amount of the provision for unexpired risks is significant, it must be disclosed separately either in the balance sheet or in the notes to the accounts.

(24) Technical provisions for linked liabilities

(Liabilities item D)

This item must comprise technical provisions constituted to cover liabilities relating to investment in the context of long term policies under which the benefits payable to members or policy holders are wholly or partly to be determined by reference to the value of, or the income from, property of any description (whether or not specified in the contract) or by reference to fluctuations in, or in an index of, the value of property of any description (whether or not so specified).

Any additional technical provisions constituted to cover death risks, operating expenses or other risks (such as benefits payable at the maturity date or guaranteed surrender values) must be included under Liabilities item C.2.

This item must also comprise technical provisions representing the obligations of a tontine’s organiser in relation to its members or policy holders.

(25) Deposits received from reinsurers

(Liabilities item F)

Where the society cedes reinsurance, this item must comprise amounts deposited by or withheld from other insurance undertakings under reinsurance contracts. These amounts may not be merged with other amounts owed to or by those other undertakings.

Where the society cedes reinsurance and has received as a deposit securities which have been transferred to its ownership, this item must comprise the amount owed by the society by virtue of the deposit.

(26) Creditors

(Liabilities item G)

Amounts owed to jointly controlled bodies and subsidiaries must be shown separately as sub-items.

(27) Debenture loans

(Liabilities item G.III)

The amount of any convertible loans must be shown separately.

PART IV — SPECIAL RULES FOR BALANCE SHEET FORMAT

Additional items

1

A society which carries on long term business must show separately, in the balance sheet or in the notes to the accounts, the total amount of assets representing the long term fund valued in accordance with the provisions of this Schedule.

Managed funds

2

(1) For the purposes of this paragraph “managed funds” are funds of a group pension fund:

(a) which fall within Class VII of Head A of Schedule 2 to the Act;

(b) which the society administers in its own name but on behalf of others; and

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

Deferred acquisition costs

3

The costs of acquiring insurance policies which are incurred during a financial year but which relate to a subsequent financial year must be deferred in a manner specified in Note (16) on the balance sheet format.

SCHEDULE 3 — FORM AND CONTENT OF THE ANNUAL ACCOUNTS OF A GROUP ACCOUNTS SOCIETY

General Rules

1

(1) The consolidated income and expenditure account and the consolidated balance sheet must incorporate in full the information contained in the individual accounts of the subsidiaries 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 included in the consolidation differs from that of the society, the group accounts must be made up:

(a) from the accounts of the subsidiary 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 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 a subsidiary according to accounting rules differing from those used in the annual accounts of a group accounts society, the values or amounts must 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 committee of management of the society that there are special reasons for departing from the requirements of sub-paragraph (1) they may do so, but particulars of any such departure, the reasons for it and its effect must 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 as a whole of the matters set out in subsections (2) and (3) of section 70 of the Act.

Elimination of group transactions

5

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

(2) Where profits and losses resulting from transactions between subsidiaries included in the consolidation are included in the book value of assets, they must 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 subsidiaries.

(4) Subparagraphs (1) and (2) need not be complied with:

(a) where a transaction has been concluded according to normal market conditions and a policy holder has rights in respect of that transaction; or

(b) if the amounts concerned are not material for the purpose of giving a true and fair view.

(5) Where advantage is taken of sub-paragraph (4)(a) above that fact must be disclosed in the notes to the accounts, and where the transaction in question has a material effect on the assets, liabilities, financial position and profit or loss of all the subsidiaries included in the consolidation that fact must also be so disclosed.

Acquisition accounting

6

(1) The following provisions apply where a body corporate becomes a subsidiary of the society.

(2) That event is referred to in those provisions as an “acquisition”, and references to the “body corporate acquired” must be construed accordingly.

7

An acquisition must be accounted for by the acquisition method of accounting.

8

(1) The acquisition method of accounting is as follows.

(2) The identifiable assets and liabilities of the body corporate acquired must 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 body corporate acquired means the assets or liabilities which are capable of being disposed of or discharged separately, without disposing of a business of the body corporate.

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

(5) There must be set off against the acquisition cost of the interest in the shares of the body corporate held by the society and its subsidiaries, the interest of the society and its subsidiaries in the adjusted capital and reserves of the body corporate 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 body corporate acquired means its capital and reserves at the date of the acquisition after adjusting the identifiable assets and liabilities of the body corporate to fair value as at that date.

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

9

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

(a) the name of the body corporate acquired; and

(b) whether the acquisition was accounted for by the acquisition method.

(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 must be given:

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

(b) the profit and loss of the body corporate or group acquired:

(i) for the period from the beginning of the financial year of the body corporate up to the date of the acquisition;

(ii) for the previous financial year of that body corporate; and

(iii) the date on which the financial year referred to in (i) began; and

(c) where the acquisition method of accounting has been adopted, the book values immediately prior to the acquisition, and the fair values at the date of acquisition, of each class of assets and liabilities of the body corporate acquired, in tabular form, including a statement of the amount of any goodwill or negative consolidation difference arising on the acquisition, together with an explanation of any significant adjustments made.

(3) In ascertaining for the purposes of subparagraph (2)(b) and (2)(c) the profit or loss of a group, the book values and fair values of assets and liabilities of a group or the amount of the assets and liabilities of a group, the set offs and other adjustments required by this schedule in the case of the annual accounts of a group accounts society must be made.

10

(1) There must be stated in a note to the accounts the cumulative amount of goodwill resulting from acquisitions in that and earlier financial years which has been written off.

(2) That figure must be shown net of any goodwill attributable to subsidiaries disposed of prior to the balance sheet date.

11

Where during the financial year there has been a disposal of a subsidiary which significantly affects the figures shown in the annual accounts of a group accounts society, there must be stated in a note to the accounts:

(a) the name of that subsidiary; and

(b) the extent to which the income or expenditure shown in the group accounts is attributable to profit or loss of the subsidiaries.

12

The information required by paragraphs 9, 10, or 11 need not be disclosed with respect to a subsidiary which:

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

(b) carries on business outside the United Kingdom,

if in the opinion of the committee of management of the society the disclosure would be seriously prejudicial to the business of that subsidiary or to the business of the society or any of its subsidiaries and the appropriate authority agrees that the information should not be disclosed.

Minority interests

13

(1) Under item 10b of the non-technical account in Part II of Schedule 1 must be shown the amount of any income or expenditure on ordinary activities attributable to shares in subsidiaries included in the consolidation held by or on behalf of persons other than the society and its subsidiaries.

(2) Under item 14c of the non-technical account in Part II of Schedule 1 must be shown the amount of any gain or loss on extraordinary activities attributable to shares in subsidiaries included in the consolidation held by or on behalf of persons other than the society and its subsidiaries.

(3) Under Liability item A IV in Part II of Schedule 2 must be shown the amount of capital and reserves attributable to shares in subsidiaries included in the consolidation held by or on behalf of persons other than the society and its subsidiaries.

SCHEDULE 4 — NOTES TO ANNUAL ACCOUNTS

Accounting policies

1

(1) There must be stated the accounting policies (including such policies with respect to the depreciation and diminution in value of the assets of the society) adopted by the society in determining the amounts to be included in respect of items shown in the income and expenditure accounts and the balance sheet.

(2) It must be stated whether the accounts have been prepared in accordance with applicable accounting standards; particulars of any material departure from these standards and the reasons for such departure must be given.

Sums denominated in foreign currencies

2

Where any sums originally denominated in foreign currency have been brought into account under any items shown in the balance sheet and income and expenditure account, the basis on which those sums have been translated into sterling must be stated.

Staff

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Aggregate amount of committee members' emoluments

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Details of chairman’s and committee members' emoluments

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Emoluments waived

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pensions of committee members and past committee members

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation to committee members for loss of office

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sums paid to third parties in respect of committee members' services

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary provisions regarding committee members' emoluments

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interpretation of provisions regarding committee members' emoluments

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets

15

(1) In respect of any assets of the society included in Assets items A (intangible assets), B.I (land and buildings) and B.II (investment in jointly controlled bodies and subsidiaries) in the society’s balance sheet the following information must be given by reference to each such item:

(a) the appropriate amounts in respect of those assets included in the item as at the date of the beginning of the financial year and as at the balance sheet date respectively;

(b) the effect on any amount included in Assets item A in respect of those assets of:

(i) any determination during that year of the value to be ascribed to any of those assets in accordance with paragraph 11 of Schedule 6 below;

(ii) acquisitions during that year of any assets;

(iii) disposals during that year of any assets; and

(iv) any transfers of assets of the society to and from the item during that year.

(2) The reference in subparagraph (1)(a) to the appropriate amounts in respect of any assets (included in an assets item) as at any date there mentioned is a reference to amounts representing the aggregate amounts determined, as at that date, in respect of assets falling to be included under the item on either of the following bases, that is to say:

(a) on the basis of cost (determined in accordance with paragraphs 27 and 28 of Schedule 6 below); or

(b) on any basis permitted by paragraph 10 or 11 of Schedule 6 below (leaving out of account in either case any provisions for depreciation or diminution in value).

(3) In addition, in respect of any assets of the society included in any assets item in the society’s balance sheet, there must be stated (by reference to each such item):

(a) the cumulative amount of provisions for depreciation or diminution in value of those assets included under the item as at each date mentioned in sub-paragraph (1)(a);

(b) the amount of any such provisions made in respect of the financial year;

(c) the amount of any adjustments made in respect of any such provisions during that year in consequence of the disposal of any of those assets; and

(d) the amount of any other adjustments made in respect of any such provisions during that year.

16

Where any assets of the society (other than listed investments) are included under any item shown in the society’s balance sheet at an amount determined on any basis mentioned in paragraph 10 or 11 of Schedule 6 below, the following information must be given:

(a) the years (so far as they are known to the committee member) in which the assets were severally valued and the several values; and

(b) in the case of assets that have been valued during the financial year, the names of the persons who valued them or particulars of their qualifications for doing so and (whichever is stated) the bases of valuation used by them.

17

In relation to any amount which is included under Asset item B.I (land and buildings) there must be stated:

(a) how much of that amount is ascribable to land of freehold tenure and how much to land of leasehold tenure;

(b) how much of the amount ascribable to land of leasehold tenure is ascribable to land held on long lease and how much to land held on short lease; and

Investments

18

(1) In respect of the amount of each item which is shown in the society’s balance sheet under Assets item B (investments), or in the case of a non-directive society’s balance sheet, Assets item A (investments), there must be stated:

(a) how much of that amount is ascribable to listed investments; and

(b) how much of any amount so ascribable is ascribable to investments as respects which there has been granted a listing on a recognised investment exchange within the meaning of the Financial Services and Markets Act 2000, other than an investment exchange in relation to which a recognition order under section 292(2) of that Act is in force (an overseas investment exchange) and how much to other listed investments.

(2) In the case of each amount shown in respect of listed securities, under sub-paragraph (1)(a), there must also be given the aggregate market value of the securities if it differs from the amount shown.

Reserves and provisions

19

(1) Where any amount is transferred:

(a) to or from any reserves;

(b) to any provisions for liabilities; or

and the reserves or provisions are or would but for regulation 6(3) above be shown as separate items in the society’s balance sheet, the information mentioned in the following sub-paragraph must be given in respect of the aggregate of reserves or provisions included in items in the balance sheet to which any such transfer relates.

(2) That information required by this paragraph is:

(a) the amount of the reserves or provisions as at the date of the beginning of the financial year and as at the balance sheet date respectively; and

(b) any amounts transferred to or from the reserves or provisions during that year.

(3) Particulars must be given of each provision included in Liabilities item E.3 (other provisions) in the society’s balance sheet in any case where the amount of that provision is material.

Provision for taxation

20

The amount of any provision for deferred taxation much be stated separately from the amount of any provision for other taxation.

Details of indebtedness

21

(1) In respect of each item shown under “creditors” in the society’s balance sheet there must be stated:

(a) the aggregate amount of any debts included under that item which are payable or repayable otherwise than by instalments and fall due for payment or repayment after the end of the period of five years beginning with the day next following the end of the financial year; and

(b) the aggregate amount of any debts so included which are payable or repayable by instalments any of which fall due for payment after the end of that period, and in the case of debts within sub-paragraph (b) above the aggregate amount of instalments falling due after the end of that period must also be disclosed for each such item.

(2) Subject to sub-paragraph (3), in relation to each debt falling to be taken into account under sub-paragraph (1), the terms of payment or repayment and the rate of any interest payable on the debt must be stated.

(3) If the number of debts is such that, in the opinion of the committee members, compliance with sub-paragraph (2) would result in a statement of excessive length, it must be sufficient to give a general indication of the terms or repayment and the rates of any interest payable on the debts.

(4) In respect of each item shown under “creditors” in the society’s balance sheet there must be stated:

(a) the aggregate amount of any debts included under that item in respect of which any security has been given by the society; and

(b) an indication of the nature of the securities so given.

(5) References above in this paragraph to an item shown under “creditors” in the society’s balance sheet include references, where amounts falling due to creditors within one year and after more than one year are distinguished in the balance sheet:

(a) in a case within sub-paragraph (1), to an item shown under the latter of those categories; and

(b) in a case within sub-paragraph (4), to an item shown under either of those categories,

and references to items shown under “creditors” include references to items which would but for Regulation 6(3) above be shown under that heading.

Guarantees and other financial commitments

22

(1) Particulars must be given of any charge on the assets of the society to secure the liabilities of any other person, including, where practicable, the amount secured.

(2) The following information must be given with respect to any other contingent liability not provided for (other than a contingent liability arising out of an insurance contract):

(a) the amount or estimated amount of that liability;

(b) its legal nature;

(3) There must be stated, where practicable:

(a) the aggregate amount or estimated amount of contracts for capital expenditure, so far as not provided for in the balance sheet; and

(b) the aggregate amount or estimated amount of capital expenditure authorised by the committee of management which has not been contracted for.

(4) Particulars must be given of:

(a) any pension commitments included under any provision shown in the society’s balance sheet; and

(b) any such commitments for which no provision has been made,

and where any such commitment relates wholly or partly to pensions payable to past committee members of the society separate particulars must be given of that commitment so far as it relates to such pensions.

(5) Particulars must also be given of any other financial commitments, other than commitments arising out of insurance contracts, which:

(a) have not been provided for in the balance sheet; and

(b) are relevant to assessing the society’s state of affairs.

(6) Commitments within any of the preceding subparagraphs undertaken on behalf of or for the benefit of any subsidiary of the society, must be stated separately from the other commitments.

Dealings with or interests in subsidiaries and jointly controlled bodies

23

Where a society is required by Part I of Schedule 2 to be shown in the society’s balance sheet in relation to its subsidiary and jointly controlled bodies includes:

(a) amounts attributable to dealings with or interests in subsidiary or jointly controlled body; or

(b) amounts attributable to dealings with or interests in any subsidiary of the society,

the aggregate amounts within paragraphs (a) and (b) respectively must be shown as separate items, either by way of subdivision of the relevant item in the balance sheet or in a note to the society’s accounts.

Separate statement of certain items of income and expenditure

24

(1) Subject to the following provisions of this paragraph, each of the amounts mentioned below must be stated.

(2) The amount of the interest or any similar charges in respect of:

(a) bank loans and overdrafts, and loans made to the society (other than bank loans and overdrafts) which:

(i) are repayable otherwise than by instalments and fall due for repayment before the end of the period of five years beginning with the day next following the end of the financial year; or

(ii) are repayable by instalments the last of which falls due for payment before the end of that period; and

(b) loans of any other kind made to the society.

This sub-paragraph does not apply to interest or charges on loans to the society from jointly controlled bodies and subsidiaries, but, with that exception, it applies to interest or charges on all loans, whether made on the security of debenture or not.

(3) The amount of income from listed investments.

(4) The amount charged to revenue in respect of sums payable in respect of the hire of plant and machinery and vehicles.

Taxation

25

(1) The basis on which the charge for United Kingdom corporation tax and deferred tax is computed must be stated.

(2) Particulars must be given of any special circumstances which affect liability in respect of taxation of income or capital gains for the financial year or liability in respect of taxation of income or capital gains for succeeding financial years.

(3) The following amounts must be stated:

(a) the amount of the charge for United Kingdom corporation tax;

(b) if that amount would have been greater but for relief from double taxation, the amount which it would have been but for such relief; and

(c) the amount of the charge for taxation imposed outside the United Kingdom of income and (so far as charged to revenue) capital gains.

Those amounts must be stated separately in respect of each of the amounts which is shown under the following items in the income and expenditure account, that is to say item III.9 (tax on ordinary activities) and item III.14 (tax on extraordinary gain or loss).

Particulars of business

26

(1) As regards general business a society must disclose:

(a) gross premiums written;

(b) gross premiums earned;

(d) gross operating expenses; and

(e) the reinsurance balance.

(2) The amounts required to be disclosed by sub-paragraph (1) must be broken down between direct insurance and reinsurance acceptances, if reinsurance acceptances amount to 10 per cent. or more of gross premiums written.

(3) Subject to sub-paragraph (4) below, the amounts required to be disclosed by sub-paragraphs (1) and (2) above with respect to direct insurance must be further broken down into the following groups of classes:

(a) accident;

(b) sickness; and

where the amount of the gross premiums written in direct insurance for each such group exceeds 10 million ECUs.

(4) The society must in any event disclose the amounts relating to the three largest groups of classes in its business.

27

(1) As regards long term business, the society must disclose:

(a) gross premiums written; and

(b) the reinsurance balance.

(2) Subject to sub-paragraph (3) below:

(a) gross premiums written must be broken down between those written by way of direct insurance and those written by ways of reinsurance; and

(b) gross premiums written by way of direct insurance must be broken down:

(i) between individual premiums and premiums under group contracts;

(ii) between periodic premiums and single premiums; and

(iii) between premiums from non-participating contracts, premiums from participating contracts and premiums from contracts where the investment risk is borne by members or policy holders.

(3) Disclosure of any amount referred to in sub-paragraph (2)(a) or (2)(b)(i), (ii) or (iii) above must not be required if it does not exceed 10 per cent. of the gross premiums written or (as the case may be) of the gross premiums written by way of direct insurance.

28

(1) Subject to sub-paragraph (2) below, there must be disclosed as regards both general and long term business the total gross direct insurance premiums resulting from contracts concluded by the society in the United Kingdom and other countries.

(2) Disclosure of any amount referred to in sub-paragraph (1) above would not be required if it does not exceed 5 per cent. of total gross premiums.

Commissions

29

There must be disclosed the total amount of commissions for direct insurance business accounted for in the financial year, including acquisition, renewal, collection and portfolio management commissions.

Miscellaneous matters

30

(1) Where any amount relating to any preceding financial year is included in any item in the income and expenditure account, the effect must be stated.

(2) Particulars must be given of any extraordinary income or charges arising in the financial year.

(3) The effect must be stated of any transactions that are exceptional by virtue of size or incidence though they fall within the ordinary activities of the society.

(4) Particulars must be given of any case where the cost of any asset is for the first time determined under paragraph 29 of Schedule 6 below.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Where management and agency services are provided by the society to third parties that fact must be disclosed where the scale of such services is material in the context of the society’s business as a whole.

Committee members' loans and transactions

31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Industrial Assurance

32

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 5

PART I

Subsidiaries

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Holdings in subsidiaries

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial years of subsidiaries

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further information about subsidiaries

4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Significant holdings in bodies corporate other than subsidiaries

5

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Construction of references to shares held by society

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Subsidiaries

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Holdings in subsidiaries

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financial years of subsidiaries

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Further information about subsidiaries excluded from consolidation

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Jointly controlled bodies

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other significant holdings of society or group

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Construction of references to shares held by society or group

20

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

21

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 6 — ACCOUNTING PRINCIPLES AND RULES

PART I — ACCOUNTING PRINCIPLES

Preliminary

1

Subject to paragraph 7 below, the amounts to be included in respect of all items shown in a society’s annual accounts must be determined in accordance with the principles set out in paragraphs 2 to 6 below.

Accounting principles

2

The society is presumed to be carrying on business as a going concern, and so, where group accounts are prepared, is the society and its subsidiaries.

3

Accounting policies must be applied consistently within the same accounts and from one financial year to the next.

4

The amount of any item must be determined on a prudent basis, and in particular:

(a) Subject to note (9) on the income and expenditure accounts format, only income arising by the balance sheet date must be included in the income and expenditure account; and

(b) all liabilities ... which have arisen ... in respect of the financial year to which the accounts relate or a previous financial year must be taken into account, including those which only become apparent between the balance sheet date and the date on which it is signed on behalf of the committee of management in pursuance of section 76 of the Act.

5

Except so far as these Regulations otherwise specify, income and charges relating to the financial year to which the accounts relate must be taken into account, without regard to the date of receipt or payment.

6

In determining the aggregate amount of any item the amount of each individual asset or liability that falls to be taken into account must be determined separately.

PART II — DEPARTURE FROM ACCOUNTING PRINCIPLES

7

If it appears to the committee of management of a society that there are special reasons for departing from any of the principles stated above in preparing annual accounts in respect of any financial year, they may do so, but particulars of the departure, the reasons for it, and its effect must be given in a note to the accounts.

PART III — CURRENT VALUE ACCOUNTING RULES

Preliminary

8

(1) Subject to paragraphs 15 to 17 below:

(a) the amounts to be included in respect of assets of any description mentioned in paragraph 10 below may be determined in accordance with that paragraph or with paragraphs 24A, 24C or 24D; and

(b) subject to paragraph 9 below, the amounts to be included in respect of assets of any description mentioned in paragraph 11 below may be determined in accordance with that paragraph or the rules set out in paragraphs 18 to 31 below (“the historical cost accounting rules”) or with paragraphs 24A, 24C or 24D.

9

The same valuation method must be applied to all investments included in any item in the balance sheet format which is denoted by an arabic number or shown as assets under CI in the balance sheet.

Valuation of assets: general

10

(1) Subject to paragraph 12 below, investments falling to be included under Assets item B (investments) must be included at their current value calculated in accordance with paragraphs 13 and 14 below.

(2) Investments falling to be included under Assets item C (assets held to cover linked liabilities) must be shown at their current value calculated in accordance with paragraphs 13 and 14 below.

11

(1) Intangible assets other than goodwill may be shown at their current cost.

(2) Assets falling to be included under Assets items F.I (tangible assets) in the balance sheet format may be shown at their current value calculated in accordance with paragraphs 13 and 14 below or at their current cost.

(3) Assets falling to be included under Assets item F.II (stocks) may be shown at current cost.

Alternative valuation of fixed-income securities

12

(1) This paragraph applies to debt securities and other fixed-income securities shown as assets under Assets items B.II (investments in associated bodies) and B.III (other financial investments).

(2) Securities to which this paragraph applies may either be valued in accordance with paragraph 10 ,24A, 24C or 24D, or their amortised value may be shown in the balance sheet, in which case the provisions of this paragraph apply.

(3) Subject to sub-paragraph (4) below, where the purchase price of securities to which this paragraph applies exceeds the amount repayable at maturity, the amount of the difference:

(a) must be charged to the income and expenditure account; and

(b) must be shown separately in the balance sheet or in the notes to the accounts.

(4) The amount of the difference referred to in sub-paragraph (3) above may be written off in instalments so that it is completely written off when the securities are repaid, in which case there must be shown separately in the balance sheet or in the notes to the accounts the difference between the purchase price (less the aggregate amount written off) and the amount repayable at maturity.

(5) Where the purchase price of securities to which this paragraph applies is less than the amount repayable at maturity, the amount of the difference must be released to income in instalments over the period remaining until repayment, in which case there must be shown separately in the balance sheet or in the notes to the accounts the difference between the purchase price (plus the aggregate amount released to income) and the amount repayable at maturity.

(6) Both the purchase price and the current value of securities valued in accordance with this paragraph must be disclosed in the notes to the accounts.

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