Accounting Principles for Lawyers

Many lawyers, especially those dealing with commercial matters, need to understand accounting yet feel on shaky ground in the area. This book is written specifically for them. It breaks down and makes clear basic concepts (such as the differences between profit and cash flow), the accounting profession and the legal and regulatory framework within which accounting operates. The relevant provisions of the Companies Act 1985 are discussed at some length. Holgate explains generally accepted accounting principles in the UK (GAAP), the trend towards global harmonisation and the role of international accounting standards. He then deals with specific areas such as group accounts, acquisitions, tax, leases, pensions, financial instruments, and realised profits, focusing in each case on those aspects that are likely to confront lawyers in their work. This book will appeal to the general practitioner as well as to lawyers working in corporate, commercial, and tax law.

Acknowledgements

ix

Glossary of terms

x

Part I The accounting environment

Introduction

3

(9)

Aim of this book

3

(1)

What is accounting?

3

(1)

The components of a company's annual report

4

(2)

The meaning of accounting terms

6

(2)

The use of accounting terms in legal agreements

8

(1)

What is GAAP?

9

(1)

Selecting and disclosing accounting policies

10

(2)

UK GAAP and international harmonisation

12

(10)

The UK Accounting Standards Board

12

(2)

International harmonisation

14

(1)

The International Accounting Standards Board

15

(2)

The EU Regulation for harmonisation within Europe

17

(2)

Convergence with US GAAP

19

(1)

Implications for the UK

20

(2)

The legal framework for accounting

22

(26)

The Companies Act 1985

22

(1)

Application of the Companies Act to UK GAAP companies and to IFRS companies

23

(1)

Accounting provisions of the Act -- Part VII

24

(5)

Accounting provisions of the Act -- Schedule 4

29

(14)

Accounting provisions of the Act -- Schedule 4A

43

(5)

Substance over form

48

(8)

Form v. substance

48

(1)

Early examples

48

(1)

Emergence of the off balance sheet industry

49

(1)

FRS 5 'Reporting the substance of transactions'

49

(3)

Examples of FRS 5 in practice

52

(3)

The future of FRS 5

55

(1)

The accounting profession and the regulatory framework for accounting and auditing

56

(8)

The accounting profession

56

(1)

The Financial Reporting Council

57

(4)

Audit reporting

61

(1)

The role of accountants in transactions

62

(2)

Communicating accounting information

64

(5)

Background

64

(1)

The corporate reporting supply chain

64

(1)

The reality of the 'earnings game'

65

(2)

Adjusted earnings numbers

67

(1)

Users and analysis of accounting information

68

(1)

Current trends in accounting

69

(8)

Why all the change?

69

(2)

Current trends in thinking

71

(6)

Part II Some specifics

Individual entity accounts and consolidated accounts

77

(14)

The distinction between entity accounts and consolidated accounts

77

(2)

When to consolidate

79

(1)

What to consolidate

80

(7)

Techniques of consolidation

87

(1)

Associates and joint ventures

88

(3)

Mergers and acquisitions

91

(19)

Introduction

91

(1)

Companies Act 1985 requirements

91

(7)

The current UK standards in overview

98

(1)

Merger accounting in the UK

98

(4)

Acquisition accounting in the UK

102

(4)

Goodwill and other intangibles under UK GAAP

106

(1)

Application of IFRS 3

107

(2)

Reform of IFRS and UK GAAP

109

(1)

Interaction of accounting with tax

110

(7)

Introduction

110

(1)

Accounting profit and its adjustment

110

(1)

Accounting for current and deferred tax

111

(3)

HM Revenue and Customs and the move to IFRS

114

(3)

Assets

117

(5)

Introduction

117

(1)

Recognition of assets

117

(1)

Measurement of assets

117

(1)

Impairment of assets

118

(1)

Classification and presentation of assets

119

(1)

Depreciation

120

(1)

Disclosure

121

(1)

Liabilities

122

(6)

Introduction

122

(1)

Definition of liabilities

122

(1)

Recognition of liabilities

123

(2)

Measurement of liabilities

125

(1)

Presentation of liabilities on balance sheets

125

(1)

Disclosure, including contingent liabilities

126

(1)

Liabilities under IFRS

127

(1)

Leases

128

(10)

Introduction

128

(1)

Leases under UK GAAP

129

(7)

Leases under IFRS

136

(1)

The way forward

137

(1)

Pensions

138

(6)

Introduction

138

(1)

Defined contribution and defined benefit

138

(1)

Accounting for defined benefit schemes

139

(1)

FRS 17

140

(2)

IAS 19

142

(1)

The effect of pensions on realised profits

143

(1)

Financial instruments, including capital instruments

144

(16)

Introduction

144

(1)

Background

144

(1)

Definitions

145

(1)

Basic classification rule

146

(1)

Shares

147

(4)

Equity instruments -- accounting treatment

151

(1)

Financial liabilities -- accounting treatment

152

(3)

Disclosure

155

(1)

Treasury shares

156

(1)

Repurchase and cancellation of shares

157

(1)

Financial instruments other than capital instruments

157

(2)

Accounting under IFRS

159

(1)

Realised and distributable profits

160

(14)

Introduction

160

(1)

'Realised' and 'distributable'

160

(1)

General rules on distributions

161

(2)

Relevant accounts

163

(1)

Relationship with reporting of performance

163

(2)

Tech 7/03

165

(4)

Effects of Tech 7/03

169

(5)

Disclosures in published accounts

174

(11)

Introduction

174

(1)

Corporate governance disclosures

174

(3)

Operating and financial review

177

(3)

Directors' report

180

(1)

Directors' emoluments

180

(2)

Related party relationships and transactions

182

(1)

Segment disclosure

183

(2)

Use of financial information in contracts and agreements

185

(16)

Introduction

185

(1)

Case study 1 -- borrowing covenants

186

(3)

Case study 2 -- sale and purchase of a subsidiary

189

(6)

Appendices

Appendix 1: List of UK accounting standards (SSAPs and FRSs), Statements and UITF Abstracts

195

(3)

Appendix 2: List of international accounting standards (IASs and IFRSs) and IFRIC interpretations

198

(3)

Index

201

What is included with this book?

The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.

The Used, Rental and eBook copies of this book are not guaranteed to include any supplemental materials. Typically, only the book itself is included. This is true even if the title states it includes any access cards, study guides, lab manuals, CDs, etc.

FREE SHIPPING

Rent More, Save More! Use code: BBRENTAL

5% off 1 book, 7% off 2 books, 10% off 3+ books

Accounting Principles for Lawyers

Summary

Table of Contents

Supplemental Materials

FREE SHIPPING

Rent More, Save More! Use code: BBRENTAL

5% off 1 book, 7% off 2 books, 10% off 3+ books

Accounting Principles for Lawyers

Summary

Table of Contents

Supplemental Materials

Digital License