The Institutes of Chartered Accountants in England and Wales and in Scotland have published for consultation proposed additional guidance on the determination of distributable profits under the Companies Act 2006.
The proposals include guidance on a number of detailed matters, including:
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the effect of a translation of the accounts of a company into another currency and the effect of the share capital being denominated in a currency other than the currency in which the company operates;
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the circumstances in which a group of transactions would be viewed as linked (and viewed as a whole for the purposes of calculating distributable profits);
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whether the share premium recorded on a cash box issue of shares where merger relief applies is a realised profit; and
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the application of Section 846 Companies Act 2006 (distributions in kind: treatment of unrealised profits) (i) where the asset to which an unrealised profit relates has been replaced by a different asset and (ii) on the distribution in kind of fungible assets (such as shares or loan notes) that have been received as consideration for the sale of another asset.
Once finalised, the guidance will be incorporated in Tech 01/09 (Guidance on the determination of realised and profits and losses in the context of distributions under the Companies Act 2006).
The closing date for comments is 19 March 2010. The exposure draft can be found here.
