FRIENDLY SOCIETIES PART I PRELIMINARY Citation and commencement 1 These Regulations may be cited as the Friendly Societies (Accounts and Related Provisions) Regulations 1994, and shall come into force on 1st September 1994. Interpretation 2 1 In these Regulations: “the Act” means the Friendly Societies Act 1992; “associated body”, in relation to a society, means a body in which the society holds shares or corresponding membership rights; “general business” has the same meaning as in the Act; “group accounts society” means a society the committee of management of which is obliged by section 69E of the Act (duty to prepare accounts) to prepare group accounts; “long term business” has the same meaning as in the Act; “long term fund” means the fund or funds maintained by a society in respect of its long term business in accordance with the provisions of the Act; “member” has the same meaning as in the Act; “non-directive society” means a friendly society to which section 37(2) or (3) of the Act does not apply, which is a registered society and which does not carry on reinsurance business; “particular account” means an income and expenditure account or a balance sheet; “policy holder”, in relation to a subsidiary or a jointly controlled body of a friendly society, has the same meaning as in any order made under section 424(2) of the Financial Services and Markets Act 2000 and for the time being in force ; “single accounts society” means a society which is not a group accounts society; “society” means a friendly society— to which section 37(2) or (3) of the Act applies, which is an incorporated friendly society, or which carries on reinsurance business; and “subsidiary” means a subsidiary of a group accounts society with which the group accounts of the society are required by section 69E of the Act to deal; 2 Where a society or a non-directive society (in this paragraph referred to as a central office) has registered branches, a requirement in these Regulations in respect of a society or a non-directive society is, except where it is expressly otherwise provided, a requirement which the central office and the registered branch must each comply with as if each of them is a society or a non-directive society. 3 Nothing in these Regulations is to be taken to imply that the carrying on by a society of any activity provision for the recording of which is contained in these Regulations is, by virtue of that provision, within the powers of that society. Application 3 The Regulations apply to the accounts and reports (as specified in regulations 4, 5, 11 and 12) of every society to which Part VI of the Act applies in respect of any financial year of the society ending on or after 31st December 1995. PART II— ACCOUNTS Annual accounts—single accounts society 4 In respect of the annual accounts of a single accounts society: a every income and expenditure account must be prepared in the format set out in Part I of Schedule 1; and b every balance sheet must be prepared in the format set out in Part I of Schedule 2. Annual accounts—group accounts society 5 In respect of the annual accounts of a group accounts society: a the provisions of this regulation apply subject to the provisions of regulation 7 below, the supplementary provisions of which also have effect in relation to those accounts; and b within those accounts: i every income and expenditure account relating to the society must be prepared in the format set out in Part I of Schedule 1; ii every income and expenditure account relating to the society and its subsidiaries must be prepared on a consolidated basis in the format set out in Part I of Schedule 1 with the modifications specified in Part II of that Schedule; iii every balance sheet relating to the society must be prepared in the format set out in Part I of Schedule 2; and iv every balance sheet relating to the society and its subsidiaries must be prepared on a consolidated basis in the format set out in Part I of Schedule 2 with the modifications specified in Part II of that Schedule. Content and form of accounts 6 1 An income and expenditure account and balance sheet referred to in regulations 4, 5 and 11 must be prepared in accordance with the relevant notes and every such document must, subject to the following paragraphs of this regulation, be prepared in the order and under the headings and subheadings in the format applicable to it. 2 Regulations 4, 5 and 11 are not to be read as: a requiring the heading or sub-heading for any item to be distinguished by any letter or number assigned to that item in the format in which it appears; b prohibiting the showing of any item in a particular account in greater detail than is required by the format for that particular account; or c prohibiting the insertion of additional items, providing that their contents are not specifically covered by any of the items prescribed in the formats. 3 Items preceded by lower case letter in any format set out in Schedule 1, 2 or 7 may be combined in a society’s annual accounts for any financial year if either: a their individual amounts are not material to assessing: i in respect of any income and expenditure account, the income and expenditure of the society (or, as the case may be, the society and its subsidiaries) for that year; and ii in respect of a balance sheet, the state of affairs of the society (or, as the case may be, the society and its subsidiaries) as at the end of that year; or b their combination facilitates that assessment, provided that where subparagraph (b) above applies, the individual amounts of any items so combined must be disclosed in a note to the annual accounts. 4 Subject to paragraph (5) below, a heading or sub-heading for an item contained in any format set out in Schedule 1, 2 or 7 must not be included if there is no amount to be shown for that item in respect of the financial year to which the annual accounts relate (and a total need not be included if, as a result of this paragraph, it would be composed of a single item). 5 For the purpose of comparing particular accounts with those for the preceding financial year: a in respect of every item shown in a balance sheet and income and expenditure account, the corresponding amount for the preceding financial year must be shown; b where 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 annual accounts relate, the former amount must be adjusted and particulars of the adjustment and the reasons for it must be disclosed in a note to the annual accounts; and c paragraph (4) above does not apply in any case where an amount can be shown for the item to which the heading or sub-heading relates in respect of the preceding financial year, and in such a case that amount must be shown under the heading or sub-heading required for that item. 6 Subject to the provisions of Schedules 1, 2 and 7, amounts in respect of items representing assets or income may not be set off against amounts in respect of items representing liabilities or expenditure (as the case may be), or vice versa. 7 In this regulation, “the relevant notes” means, in relation to any particular account, Part III of Schedule 1, Part III and Part IV of Schedule 2 or Part III of Schedule 7, whichever is applicable. Group accounts—supplementary provisions 7 1 The annual accounts of a group accounts society must comply with the further provisions of Schedule 3 as to the form and content of the consolidated income and expenditure account and the balance sheet, and the additional information to be provided by way of notes to the accounts. 2 Subject to the exceptions authorised or required by this regulation, all the subsidiaries of the society must be included in the consolidated income and expenditure account and the balance sheet as required by Regulation 5, and in the notes to the accounts in respect of the society and its subsidiaries in combination, as required by regulation 8(2)(b). 3 A subsidiary may be excluded from the requirements of paragraph (2) if compliance with those requirements is not material for the purpose of giving a true and fair view for the society and its subsidiaries as a whole, of the matters set out in subsection (2) of section 69F of the Act. 4 If a society has two or more subsidiaries, they do not qualify under paragraph (3) for exclusion from the requirements of paragraph (2) if taken as a whole they are material for the purpose enumerated in paragraph (3). 5 Each particular account which is a group account must combine the information contained in the particular account of the society and the accounts of its subsidiaries from which it is derived, adjusted so far as is necessary to consolidate those accounts. 6 In the group accounts, the interest of the society in a jointly controlled body and the amount of profit or loss attributable to such an interest, must be shown by the equity method of accounting (which must include dealing with any goodwill arising in accordance with paragraphs 19 to 22 and 24 of Schedule 6). 7 The equity method of accounting referred to in paragraph (6) need not be applied if the amounts in question are not material for the purpose of giving a true and fair view, for the society and its subsidiaries as a whole, of the matters set out in subsection (2) of section 69F of the Act. Notes to annual accounts 8 1 The annual accounts of a single accounts society must, subject to paragraph (6) below, include notes to them containing the material specified, and set out in the manner specified, in Schedule 4 below, as well as the notes required to be included by other provisions of these Regulations. 2 The annual accounts of a group accounts society must, subject to paragraph (6) below and any provision in Schedule 4 below which indicates otherwise, include notes to them containing: a in respect of the society; and b in respect of the society and its subsidiaries in combination, the material specified, and set out in the manner specified, in Schedule 4 below, as well as the notes required to be included by other provisions of these Regulations. 3 For the purposes of paragraph (2)(b) above: a any reference in ... Schedule 4 below to a society must be taken as a reference to the society and its subsidiaries in combination; and b each associated body of the society which is not a subsidiary must be treated as an associated body of the group. 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The annual accounts of a non-directive society must include notes to them containing the material from Schedule 4 below as is specified in Part II of Schedule 7 below, (and such material must be, as far as is possible, set out in the manner specified in Schedule 4 below), as well as the notes required to be included by other provisions of these Regulations and in the application of the Schedule to a non-directive society, references in the Schedule to a society are, where appropriate, to be construed as references to a non-directive society. 6 Paragraphs (1), (2) and (5) above are not to be read as prohibiting the disclosing of any material in the notes to the annual accounts in greater detail than is required by these Regulations. Associated bodies 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting principles and rules 10 1 A society must prepare its annual accounts in accordance with the accounting principles and rules set out in Schedule 6. 2 A non-directive society must prepare its annual accounts in accordance with the accounting principles and rules set out in Parts I and II of Schedule 6 and in the application of those Parts of the Schedule to a non-directive society, references in those Parts to a society are, where appropriate, to be construed as references to a non-directive society. Accounts to have regard to substance of a transaction 10A The management committee of a society shall, in determining how amounts are presented within items in the income and expenditure account and balance sheet, have regard to the substance of the reported transaction or arrangement, in accordance with generally accepted accounting principles or practice. Annual accounts—non-directive society 11 In respect of the annual accounts of a non-directive society: a every income and expenditure account must be prepared in the format set out in Part I of Schedule 7; b every balance sheet must be prepared in the format set out in Part II of Schedule 7; and c such accounts must be prepared in accordance with the requirements set out in regulation 8 above as modified in Part III of Schedule 7. PART III— COMMITTEE OF MANAGEMENT'S ANNUAL REPORT Committee of management’s annual report 12 1 Each committee of management’s annual report of a society prepared under section 71 of the Act (Report of the committee of management of a friendly society on the society’s affairs) must contain, in addition to the other matters required to be contained in it by the Act, the material specified in Part I of Schedule 8. 2 Each committee of management’s annual report of a non-directive society prepared under section 71 of the Act (Report of the committee of management of a friendly society on the society’s affairs) must contain the material specified in Part I of Schedule 8 as modified by Part II of the Schedule 8. PART IV— MISCELLANEOUS AND GENERAL Transitional provisions 13 1 A society may, with respect to a financial year preceding the financial year of the society to which these Regulations first apply, prepare such annual accounts as it would have been required to prepare had these Regulations not been made. 2 Where any provision of these Regulations requires the recording of a particular item during or as at the end of a previous financial year, and where: a that previous financial year ended before the coming into force of these Regulations; and b the legislation in force as at the end of that previous financial year did not require the recording of that particular item, then, if the records of the society are so kept as to enable that particular item to be identified, it must be identified and so recorded, but if the records of the society are not so kept, it must be included on the basis of an estimate. 3 Where under paragraph (2) an estimate is used in respect of any item, that fact must be disclosed in a note to the accounts. Interpretation of Schedules 14 Schedule 9 has effect for the interpretation of the Schedules to these Regulations. In witness whereof the common seal of the Friendly Societies Commission is hereto fixed, and is authenticated by me, a person authorised under paragraph 13 of Schedule 1 to the Friendly Societies Act 1992 on 18th July 1994. Michael Cook Secretary to the Commission We consent to this Order. Tim Wood Irvine Patnick Two of the Lords Commissioners of Her Majesty’s Treasury. 20th July 1994.