Accounting Standards and Guidance

Statements of Recommended Practice (SORPs)

Accounting by limited liability partnerships (LLPs) 2017

APPENDIX 4: MERGER ACCOUNTING ON INITIAL TRANSITION OF AN EXISTING UNDERTAKING TO A SINGLE-ENTITY LLP FORMED FOR THE PURPOSE

Introduction
1.This note explains how the SORP applies section 19 of FRS 102 in certain special circumstances that arise when merger accounting is adopted on initial transition of an existing undertaking to a single-entity LLP formed for the purpose.
2.Paragraph 115 of the SORP states that a single-entity LLP formed by the transfer or incorporation of existing undertakings should present corresponding pro-forma amounts.
3.Paragraph 116 of the SORP deals with a situation that is common in LLP incorporations, where the undertaking is transferred to the LLP part way through an accounting period and the LLP is not itself a parent undertaking. Paragraph 116 states that where there is a hiatus between formation of the LLP and the transfer, the net assets at book values should be reflected in the accounts at the date of the transfer, and results should be included for the period from the transfer to the end of the accounting period. This is the commonly adopted practice.
4.Paragraph 116 also suggests that a pro-forma profit and loss account (or statement of comprehensive income), including corresponding amounts, should be given for the whole of the original entity's accounting period spanning the transfer.
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