Audit: Standards

(asked on 6th December 2021) - View Source

Question to the Department for Business, Energy and Industrial Strategy:

To ask Her Majesty's Government why the White Paper Restoring Trust in Audit and Corporate Governance, published in March relies at paragraph 2.2.2 on the Brydon Review of 2019, while (1) the Companies Act 2006 sets out that a company's undistributable reserves include its accumulated unrealised profits, and (2) paragraph 43 of the Financial Reporting Council Bulletin published in March 2020 states that an auditor must undertake "an examination of the relationship between the company’s net assets and it’s called up share capital and undistributable reserves as stated in the audited balance sheet".


Answered by
Lord Callanan Portrait
Lord Callanan
Parliamentary Under Secretary of State (Department for Energy Security and Net Zero)
This question was answered on 20th December 2021

There are currently no specific requirements under company law or accounting standards for financial statements to disclose the total amount of profits that are distributable. Some companies do provide these figures, but they are provided on a voluntary basis.

The text quoted in the question relates to the statement an auditor is required to make to a company under section 92 of the Companies Act 2006 when a private company re-registers as a public company. It does not establish a requirement for the company to disclose its undistributable reserves.

The Government White Paper, Restoring Trust in Audit and Corporate Governance, set out proposals to require companies, within an agreed scope, to disclose the total amount of reserves that are distributable. The Government will respond to the White Paper consultation in due course.

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