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Realised and distributable profits

11 July 2017

The ICAEW has updated its guidance on realised and distributable profits under the Companies Act 2006 with immediate effect. TECH 02/17 replaces the guidance in TECH 02/10 and addresses the consequences of the new accounting treatments required under FRS 102 and other accounting standards in issue at 31 December 2016.

TECH 02/17 provides clear and comprehensive guidance on identifying, interpreting and applying the principles relating to the determination of realised profits and losses for the purposes of making distributions under Companies Act 2006. It provides specific guidance on intra-group transactions, including:

  • The realised profits implications of the imputed interest on interest-free inter-company term loans
  • How the capital contribution arising in a subsidiary receiving an interest-free term loan from its parent is not a realised profit for the purposes of calculating distributable reserves.

TECH 02/17 does not provide guidance on how to account for transactions and arrangements. It has, however, been necessary to make assumptions about accounting treatments while providing guidance on the effect on realised profits.

Read TECH 02/17 ‘Guidance on realised and distributable profits under the Companies Act 2006’. The ICAEW has also published versions of TECH 02/17 which track changes both from the old guidance in TECH 02/10 and also from the Exposure Draft that preceded it.

For help and advice on realised and distributable profits please get in touch with your usual BDO contact or Richard Matthews.

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