1. (1) Without prejudice to the generality of section 9 of the Interpretation Act 2005 and its application to the body of this Act and to Schedules 1, 2 and 5 to 18—

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

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

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

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

SECTION A

GENERAL RULES

2. (1) Subject to the provisions of this Schedule—

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

(b) every profit and loss account of a company shall show the items listed in the profit and loss accounts format so set out,

in either case in the order and under the headings given in the format adopted.

(2) Subparagraph (1) shall not be read as requiring the heading for any item in the balance sheet, or profit and loss account, of a company to be distinguished by any letter or number assigned to that item in the formats set out in Section B.

3. (1) Where, in accordance with paragraph 2(1)(a), a company’s balance sheet for any financial year has been prepared by reference to one of the formats set out in Section B, the directors of the company shall adopt the same format in preparing the financial statements for subsequent financial years unless, in their opinion, there are special reasons for a change.

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

4. (1) Any item required in accordance with paragraph 2 to be shown in the balance sheet or profit and loss account of a company may be shown in greater detail than that required by the format adopted.

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

(a) preliminary expenses,

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

(c) costs of research.

(3) The balance sheet or profit and loss account of a company may include subtotals where their inclusion facilitates the assessment of the financial position or profit or loss of the company for the financial year concerned.

(4) Where an asset or liability relates to more than one of the items listed in either of the balance sheet formats set out in Section B, its relationship to other items shall be disclosed either under the item where it is shown or in the notes to the financial statements.

(5) The opening balance sheet for each financial year shall correspond to the closing balance sheet for the preceding financial year.

5. In respect of every item shown in the balance sheet, or profit and loss account, or notes thereto, of a company, the corresponding amount for the financial year immediately preceding that to which the balance sheet or profit and loss account relates shall also be shown and, if 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 balance sheet or profit and loss account relates, the former amount may be adjusted, and particulars of the adjustment and the reasons therefor shall be given in a note to the financial statements.

6. (1) Subject to subparagraph (2), a heading corresponding to an item listed in the format adopted in preparing the balance sheet or profit and loss account of a company shall not be included in the balance sheet or profit and loss account, as the case may be, if there is no amount to be shown for that item in respect of the financial year to which the balance sheet or profit and loss account relates.

(2) Subparagraph (1) shall not apply in any case where an amount can be shown for the item in question in respect of the financial year immediately preceding that to which the balance sheet or profit and loss account relates, and that amount shall be shown under the heading required by the format adopted as aforesaid.

7. (1) Subject to subparagraph (2), amounts in respect of items representing assets or income may not be set off in the financial statements of a company against amounts in respect of items representing liabilities or expenditure, as the case may be, or vice versa.

(2) Subparagraph (1) shall not apply in any case where such set off is in accordance with applicable accounting standards, provided that the gross amounts are disclosed in a note to the financial statements.

SECTION B

THE REQUIRED FORMATS FOR FINANCIAL STATEMENTS

Preliminary

8. References in this Part to the items listed in any of the formats set out in this Part are references to those items read together with any notes following the formats which apply to any of those items.

9. A number in brackets following any item in, or any heading to, any of the formats set out in this Part is a reference to the note of that number in the notes following the formats.

10. In the notes following the formats—

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

(b) references to a numbered format are references to the balance sheet format of that number set out in this Part.

BALANCE SHEET FORMATS

Format 1

A. Called up share capital not paid

B. Fixed assets

C. Current assets

D. Prepayments and accrued income

E. Creditors: amounts falling due within one year

F. Net current assets (liabilities)

G. Total assets less current liabilities

H. Creditors: amounts falling due after more than one year

I. Provisions for liabilities

J. Accruals and deferred income

K. Capital and reserves

Format 2

ASSETS

A. Called up share capital not paid

B. Fixed assets

C. Current assets

D. Prepayments and accrued income

CAPITAL, RESERVES AND LIABILITIES

A. Capital and reserves

B. Provisions for liabilities

C. Creditors (1)

D. Accruals and deferred income

NOTE ON THE BALANCE SHEET FORMATS

(1) Creditors

(Format 2, "CAPITAL, RESERVES AND LIABILITIES", item C)

Amounts falling due within one year and after one year shall be shown separately.

PROFIT AND LOSS ACCOUNT FORMAT

1. Turnover

2. Other income

3. Cost of raw materials and consumables

4. Staff costs

5. Value adjustments and other amounts written off assets

6. Other expenses

7. Tax

8. Profit or loss]

SECTION A

ACCOUNTING PRINCIPLES

Preliminary

11. Subject to paragraph 18, the amounts to be included in the financial statements of a company in respect of the items shown shall be determined in accordance with the principles set out in paragraphs 12 to 17.

Accounting principles

12. The company shall be presumed to be carrying on business as a going concern.

13. Accounting policies and measurement bases shall be applied consistently from one financial year to the next.

14. The amount of any item in the financial statements shall be determined on a prudent basis and in particular—

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

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

(c) all value adjustments for diminution in value shall be recognised, whether the result for the financial year to which the financial statements relate is a profit or loss.

15. All income and expenses relating to the financial year to which the financial statements relate shall be taken into account without regard to the date of receipt or payment.

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

17. Items in the profit and loss account and balance sheet shall be accounted for and presented having regard to the substance of the reported transaction or arrangement in accordance with applicable accounting standards.

18. The provisions of this Schedule need not be complied with where the amounts involved are not material for the purpose of giving a true and fair view.

Departure from the accounting principles

19. If it appears to the directors of a company that there are special reasons for departing from any of the principles stated above in preparing the company’s financial statements in any particular year, they may so depart, but particulars of the departure, the reasons for it and its effect on the balance sheet and profit and loss account of the company shall be stated in a note to the financial statements.

SECTION B

HISTORICAL COST ACCOUNTING RULES

Preliminary

20. The amounts to be included in respect of all items shown in a company’s financial statements shall be determined in accordance with the rules set out in paragraphs 21 to 30.

FIXED ASSETS

>General rules

21. Subject to any value adjustment for depreciation or diminution in value made in accordance with paragraph 22 or 23, the amount to be included in respect of any fixed asset shall be its purchase price or production cost.

Rules for depreciation and diminution in value

22. In the case of any fixed asset which has a limited useful economic life, the amount of—

(a) its purchase price or production cost, or

(b) where it is estimated that any such asset will have a residual value at the end of the period of its useful economic life, its purchase price or production cost less that estimated residual value,

shall be reduced by value adjustments for depreciation calculated to write off that amount systematically over the period of the asset’s useful economic life.

23. (1) Where a financial asset of a description falling to be included under item A. III of either of the balance sheet formats set out in Part II has diminished in value, value adjustments 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; and any such value adjustments which are not shown separately in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the financial statements.

(2) Value adjustments 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 value adjustments which are not shown separately in the profit and loss account shall be disclosed (either separately or in aggregate) in a note to the financial statements.

(3) Where the reasons for which any value adjustment was made in accordance with subparagraph (1) or (2) have ceased to apply to any extent, that value adjustment 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 profit and loss account shall be disclosed (either separately or in aggregate) in a note to the financial statements.

Rules for determining particular fixed asset items

24. (1) Notwithstanding that an item in respect of "development costs" is included under "fixed assets" in the balance sheet formats set out in Part II, an amount may only be included in a company’s balance sheet in respect of that item in special circumstances.

(2) If an amount is included in a company’s balance sheet in respect of development costs, the following information shall be given in a note to the financial statements—

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

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

25. (1) The application of paragraphs 21 to 23 in relation to goodwill and development costs (in any case where goodwill or development costs are treated as assets) and other intangible assets is subject to the following provisions of this paragraph.

(2) Subject to subparagraph (3)—

(a) the amount of the consideration for any goodwill acquired by a company,

(b) the amount of development costs capitalised, or

(c) the amount of other intangible assets recognised,

shall be reduced by value adjustments for depreciation calculated to write off that amount systematically over the useful economic life of the goodwill, development costs or other intangible assets.

(3) Where, in exceptional circumstances, the useful life of goodwill acquired by a company or development costs or other intangible assets capitalised cannot be reliably estimated, the amounts referred to in subparagraph (2)(a), (b) and (c) shall be reduced by value adjustments for depreciation calculated to write off those amounts systematically over a period which shall be not more than 10 years.

(4) In any case where any goodwill acquired by a company is shown or included as an asset in the company’s balance sheet, the period chosen for writing off the consideration for that goodwill and the reasons for choosing that period shall be disclosed in a note to the financial statements.

(5) Where, in accordance with paragraph 23(2), a value adjustment for diminution in value has been recognised for goodwill, even if it is considered that the reason for the diminution in value has ceased to exist, the value adjustment shall not be reversed as required by paragraph 23(3).

CURRENT ASSETS

26. Subject to paragraph 27, the amount to be included in respect of any current asset shall be its purchase price or production cost.

27. (1) If the net realisable value of any current asset is lower than its purchase price or production cost, the amount to be included in respect of that asset shall be the net realisable value.

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

MISCELLANEOUS

Excess of money owed over value received as an asset item

28. (1) Where the amount repayable on any debt owed by a company 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 exists—

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

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

DETERMINATION OF PURCHASE PRICE OR PRODUCTION COST

29. (1) The purchase price of an asset shall be determined by adding to the actual price paid any expenses incidental to its acquisition and by deducting from the actual price paid any income incidental to its acquisition.

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

(3) In addition there may be included in the production cost of an asset—

(a) a reasonable proportion of the costs incurred by the company which are only indirectly attributable to the production of that asset, but only to the extent that they relate to the period of production, and

(b) interest on capital borrowed to finance the production of that asset, to the extent that it accrues in respect of the period of production,

provided, however, that in a case within clause (b), the inclusion of the interest in determining the cost of that asset and the amount of the interest so included is disclosed in a note to the financial statements.

(4) Distribution costs may not be included in production costs.

30. (1) Subject to the qualification mentioned in subparagraph (2), the purchase price or production cost of—

(a) any assets which fall to be included in the general item "stocks" shown in a company’s balance sheet, and

(b) any assets which are fungible assets (including investments), may be determined by the application of any of the methods mentioned in subparagraph (3) in relation to any such assets of the same class.

(2) The method chosen must be one which appears to the directors to be appropriate in the circumstances of the company.

(3) The methods are—

(a) the method known as "first in, first out" (FIFO),

(b) a weighted average price, and

(c) any other method reflecting generally accepted best practice.

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

Preliminary

31. (1) Any information required in the case of any company by the following provisions of this Part shall (if not given in the company’s financial statements) be given by way of a note to those financial statements.

(2) These notes shall be presented in the order in which, where relevant, the items to which they relate are presented in the balance sheet and in the profit and loss account.

Information supplementing the balance sheet

32. Paragraphs 33 to 35 require information which either supplements the information given with respect to any particular items shown in the balance sheet or is otherwise relevant to assessing the company’s financial position in the light of the information so given.

Appropriation of profit and loss account

33. The profit and loss account, balance sheet or notes to the financial statements of a company for a financial year shall show—

(a) the aggregate amount of dividends paid in the financial year (other than dividends for which a liability existed at the immediately preceding financial year end date),

(b) the aggregate amount of dividends the company is liable to pay at the financial year end date (other than dividends for which a liability existed at the immediately preceding financial year end date),

(c) separately, any transfer between the profit and loss account and other reserves,

(d) any other increase or reduction in the balance on the profit and loss account since the immediately preceding financial year end date,

(e) the profit or loss brought forward at the beginning of the financial year, and

(f) the profit or loss carried forward at the end of the financial year.

Details of indebtedness

34. In respect of "creditors" shown in the company’s balance sheet there shall be stated—

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

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

Guarantees and other financial commitments

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

(2) Particulars and the total amount or estimated total amount shall be given with respect to any other financial commitments, guarantees or contingencies not provided for in the balance sheet.

(3) An indication of the nature and form of any valuable security given by the company in connection with the commitments, guarantees or contingencies referred to in subparagraph (2) shall be given in the financial statements.

(4) The total amount of any commitments within subparagraph (2) concerning retirement benefits shall be disclosed separately.

(5) Particulars shall be given of retirement benefit commitments which are included in the balance sheet.

(6) The aggregate amount of any commitments, guarantees or contingencies referred to in subparagraph (2) which are undertaken on behalf of or for the benefit of—

(a) any holding undertaking or fellow subsidiary undertaking of the company,

(b) any subsidiary undertaking of the company, or

(c) any undertaking in which the company has a participating interest,

shall be separately stated and those within each of clauses (a), (b) and (c) shall also be stated separately from those within any other of those clauses.]

Assets: fixed or current

36. For the purposes of this Schedule, assets of a company shall be taken to be fixed assets if they are intended for use on a continuing basis in the company’s activities, and any assets not intended for such use shall be taken to be current assets.

Materiality

37. In this Schedule, "material" means the status of information where its omission or misstatement could reasonably be expected to influence decisions that users make on the basis of the financial statements of the undertaking. The materiality of individual items shall be assessed in the context of other similar items.

Value adjustments

38. (1) References in this Schedule to value adjustments for depreciation or diminution in value of assets are references to any amount written off by way of providing for depreciation or diminution in value of assets.

(2) Any reference in the profit and loss account format set out in Part II to amounts written off assets is a reference to the movement in any value adjustment for depreciation or diminution in value of assets of that description.

Provisions

39. References in this Schedule to provisions are references to any amount retained as reasonably necessary for the purpose of providing for any liability the nature of which is clearly defined and which exists at the financial year end date but, as respects the amount of which or the date on which it will be settled, there is uncertainty.

Purchase price

40. References in this Schedule (however expressed) to the purchase price of an asset of a company or of any raw materials or consumables used in the production of any such asset shall be read as including references to any consideration (whether in cash or otherwise) given by the company in respect of that asset or in respect of those materials or consumables (as the case may require).]