The Friendly Societies (Accounts and Related Provisions) Regulations 1994

Regulation 8

SCHEDULE 4NOTES TO ANNUAL ACCOUNTS

Accounting policies

1.—(1) There must be stated the accounting policies (including such policies with respect to the depreciation and diminution in value of the assets of the society) adopted by the society in determining the amounts to be included in respect of items shown in the income and expenditure accounts and the balance sheet.

(2) It must be stated whether the accounts have been prepared in accordance with applicable accounting standards; particulars of any material departure from these standards and the reasons for such departure must be given.

Sums denominated in foreign currencies

2.  Where any sums originally denominated in foreign currency have been brought into account under any items shown in the balance sheet and income and expenditure account, the basis on which those sums have been translated into sterling must be stated.

Staff

3.—(1) The following information must be given with respect to the staff of the society:

(a)the average number of persons employed by the society in the financial year; and

(b)the average number of persons so employed within each category of persons employed by the society.

(2) The average number required by subparagraph (1)(a) or (b) must be determined by dividing the relevant annual number by the number of complete months in the financial year, and that relevant annual number must be determined by ascertaining for each complete calendar month in the financial year:

(a)for the purpose of subparagraph (1)(a), the number of persons employed under contracts of service by the society in that month (whether throughout the month or not); and

(b)for the purposes of subparagraph (1)(b), the number of persons in each such category of person so employed, and, in each case, adding together all the monthly numbers.

(3) In respect of all persons employed by the society during the financial year who are taken into account in determining the relevant annual number for the purposes of subparagraph (1)(a) there must also be stated the aggregate amounts respectively of:

(a)wages and salaries paid or payable in respect of that year to those persons;

(b)social security costs incurred by the society on their behalf; and

(c)other pension costs so incurred,

save in so far as those amounts or any of them are stated in the income and expenditure account.

(4) The categories of persons employed by the society by reference to which the number required to be disclosed by subparagraph (1)(b) is to be determined such as to assist the assessment of the manner in which the society’s activities are organised.

Aggregate amount of committee members' emoluments

4.—(1) The aggregate amount of committee members' emoluments must be shown.

(2) In subparagraph (1), “committee members' emoluments” means the emoluments paid to or receivable by any person in respect of:

(a)his services as a committee member of the society; or

(b)his services while committee member of the society:

(i)as director of any of its associated bodies; or

(ii)otherwise in connection with the management of the affairs of the society or any of its associated bodies.

(3) There must also be shown, separately, the aggregate amount within subparagraph 2(a) and 2(b)(i) and the aggregate amount within subparagraph 2(b)(ii).

(4) For the purposes of this paragraph the “emoluments” of a person include:

(a)fees and percentages;

(b)sums paid by way of expenses allowance (so far as those sums are chargeable to United Kingdom income tax);

(c)contributions paid in respect of him under any pension scheme; and

(d)the estimated money value of any other benefits received by him otherwise than in cash, and emoluments in respect of a person’s accepting office as a committee member must be treated as emoluments in respect of his services as a committee member.

Details of chairman’s and committee members' emoluments

5.—(1) Where the amount shown in compliance with paragraph 4(1) is £60,000 or more, the emoluments of the chairman must be shown.

(2) Where subparagraph (1) requires an amount to be shown and there has been more than one chairman during the year, the emoluments of each must be stated so far as attributable to the period during which he was chairman.

(3) Where the amount shown in compliance with paragraph 4(1) is £60,000 or more, the following information must be given with respect to the emoluments of committee members:

(a)the number of committee members whose emoluments fell within each of the following bands:

(i)not more than £5,000;

(ii)more than £5,000 but not more than £10,000;

(iii)more than £10,000 but not more than £15,000,

• and so on; and

(b)if the emoluments of any of the committee members exceeded that of the chairman, the greatest amount of emoluments of any committee member.

(4) Where more than one person has been chairman during the year, the reference in subparagraph (3)(b) to the emoluments of the chairman is to the aggregate of the emoluments of each person who has been chairman, so far as attributable to the period during which he was chairman.

(5) The information required by subparagraph (3)(a) need not be given in respect of a committee member who discharged his duties as such wholly or mainly outside the United Kingdom; and any such committee member must be left out of account for the purposes of subparagraph (3)(b).

(6) In this paragraph “emoluments” has the same meaning as in paragraph 4, except that it does not include contributions paid in respect of a person under a pension scheme.

Emoluments waived

6.—(1) There must be shown:

(a)the number of committee members who have waived rights to receive emoluments in the present financial year or in the future which, but for the waiver, would have fallen to be included in the amount shown under paragraph 4(1) in the present annual accounts or in future annual accounts; and

(b)the aggregate amount of those emoluments.

(2) For the purposes of this paragraph it must be assumed that a sum not receivable in respect of a period would have been paid at the time at which it was due, and if such sum was payable only on demand, it must be deemed to have been due at the time of the waiver.

Pensions of committee members and past committee members

7.—(1) There must be shown the aggregate amount of committee members' or past committee members' pensions.

(2) This amount does not include any pension paid or receivable under a pension scheme if the scheme is such that the contributions under it are substantially adequate for the maintenance of the scheme, but, subject to this, it includes any pension paid or receivable in respect of any such services of a committee member or past committee member as are mentioned in paragraph 4(2) whether to or by him or on his nomination or by virtue of dependence on or other connection with him, to or by any other person.

(3) The amount shown must distinguish between pensions in respect of services as a committee member of the society or a director of any of its associated bodies, and other pensions.

(4) References to pensions include benefits otherwise than in cash and in relation to so much of a pension as consists of such a benefit references to its amount are to the estimated money value of the benefit.

(5) The nature of any such benefit as is mentioned in subparagraph (4) must be disclosed.

Compensation to committee members for loss of office

8.—(1) There must be shown the aggregate amount of any compensation to committee members or past committee members in respect of loss of office.

(2) This amount includes compensation received or receivable by committee members or past committee members for:

(a)loss of office as a committee member of the society; or

(b)loss, while committee member of the society or in connection with his ceasing to be a committee member of it, of:

(i)any other office in connection with the management of the society’s affairs; or

(ii)any office as director or otherwise in connection with the management of the affairs of any associated body of the society,

• and must distinguish between compensation in respect of the office of committee member of the society or a director of any of its associated bodies, and compensation in respect of other offices.

(3) References to compensation include benefits otherwise than in cash, and in relation to such compensation:

(a)references to its amount are to the estimated money value of the benefit; and

(b)the nature of the compensation must be disclosed.

(4) References to compensation for loss of office include compensation in consideration for, or in connection with, a person’s retirement from office.

Sums paid to third parties in respect of committee members' services

9.—(1) There must be shown the aggregate amount of any consideration paid to or receivable by third parties for making available the services of any person:

(a)as a committee member of the society; or

(b)while a committee member of the society:

(i)as director of any of its associated bodies; or

(ii)otherwise in connection with the management of the affairs of the society or any of its associated bodies.

(2) The reference in subparagraph (1) to consideration includes benefits paid or receivable otherwise than in cash, and in relation to such consideration:

(a)references to its amount are to the estimated money value of the benefit; and

(b)the nature of the consideration must be disclosed.

(3) The reference in subparagraph (1) to third parties is to person other than:

(a)the committee member himself or a person connected with him or a body corporate associated with him; and

(b)the society or any of its associated bodies.

Supplementary provisions regarding committee members' emoluments

10.—(1) The following applies with respect to the amounts to be shown under paragraphs 4, 7, 8 and 9.

(2) The amount in each case includes all relevant sums paid by or receivable from:

(a)the society;

(b)the society’s associated bodies; and

(c)any other person, except sums to be accounted for to the society or any of its associated bodies.

(3) The amount to be shown under paragraph 8 must distinguish between the sums respectively paid by or receivable from the society, its associated bodies, and person other than the society and its associated bodies.

(4) References to amounts paid to or receivable by a person include amounts paid to or receivable by a person connected with him or a body corporate associated with him (but not so as to require an amount to be counted twice).

11.—(1) The amounts to be shown for any financial year under paragraphs 4, 5, 8 and 9 are the sums receivable in respect of that year (whenever paid) or, in the case of sums not receivable in respect of a period, the sums paid during that year.

(2) But where:

(a)any sums are not shown in a note to the accounts for the relevant financial year on the ground that the person receiving them is liable to account for them as mentioned in paragraph 10(2), but the liability is thereafter wholly or partly released or is not enforced within a period of 2 years; or

(b)any sums paid by way of expenses allowance are charged to United Kingdom income tax after the end of the relevant financial year, those sums must, to the extent to which the liability is released or not enforced or they are charged as mentioned (as the case may be), be shown in a note to the first accounts in which it is practicable to show them and must be distinguished from the amounts to be shown apart from this provision.

12.  Where the Chief Executive of the society is not also a committee member of the society, he must be deemed, for the purposes of paragraphs 4 to 11 to be a committee member of the society. In such circumstances there must be a note in the accounts specifying that the Chief Executive has been so deemed to be a committee member.

13.  Regulation 8(2)(b) does not apply to paragraphs 4 to 12.

Interpretation of provisions regarding committee members' emoluments

14.—(1) In paragraphs 4 to 13:

(a)references to services to an associated body of a society must be taken to refer to services to a body which was an associated body of the society at the time at which the services were rendered, or, in the case only of paragraph 8, immediately before the committee member lost his office as committee member;

(b)“pension” includes any superannuation allowance, superannuation gratuity or similar payment;

(c)“pension scheme” means a scheme for the provision of pensions in respect of services as committee member or otherwise which is maintained in whole or in part by means of contributions; and

(d)“contribution”, in relation to a pension scheme, means any payment (including an insurance premium) paid for the purposes of the scheme by or in respect of persons rendering services in respect of which pensions will or may become payable under the scheme except that it does not include any payment in respect of two or more persons if the amount paid in respect of each of them is not ascertainable.

(2) In paragraphs 9 and 10, references to a person being “connected” with a committee member, and to a committee member “associated with” a body corporate, must be construed in accordance with section 70 of the Building Societies Act 1986(1) (as applied to friendly societies by paragraph 9 of Schedule 11 to the Act).

Assets

15.—(1) In respect of any assets of the society included in Assets items A (intangible assets), B.I (land and buildings) and B.II (investment in jointly controlled bodies and subsidiaries) in the society’s balance sheet the following information must be given by reference to each such item:

(a)the appropriate amounts in respect of those assets included in the item as at the date of the beginning of the financial year and as at the balance sheet date respectively;

(b)the effect on any amount included in Assets item A in respect of those assets of:

(i)any determination during that year of the value to be ascribed to any of those assets in accordance with paragraph 11 of Schedule 6 below;

(ii)acquisitions during that year of any assets;

(iii)disposals during that year of any assets; and

(iv)any transfers of assets of the society to and from the item during that year.

(2) The reference in subparagraph (1)(a) to the appropriate amounts in respect of any assets (included in an assets item) as at any date there mentioned is a reference to amounts representing the aggregate amounts determined, as at that date, in respect of assets falling to be included under the item on either of the following bases, that is to say:

(a)on the basis of cost (determined in accordance with paragraphs 27 and 28 of Schedule 6 below); or

(b)on any basis permitted by paragraph 10 or 11 of Schedule 6 below (leaving out of account in either case any provisions for depreciation or diminution in value).

(3) In addition, in respect of any assets of the society included in any assets item in the society’s balance sheet, there must be stated (by reference to each such item):

(a)the cumulative amount of provisions for depreciation or diminution in value of those assets included under the item as at each date mentioned in sub-paragraph (1)(a);

(b)the amount of any such provisions made in respect of the financial year;

(c)the amount of any adjustments made in respect of any such provisions during that year in consequence of the disposal of any of those assets; and

(d)the amount of any other adjustments made in respect of any such provisions during that year.

16.  Where any assets of the society (other than listed investments) are included under any item shown in the society’s balance sheet at an amount determined on any basis mentioned in paragraph 10 or 11 of Schedule 6 below, the following information must be given:

(a)the years (so far as they are known to the committee member) in which the assets were severally valued and the several values; and

(b)in the case of assets that have been valued during the financial year, the names of the persons who valued them or particulars of their qualifications for doing so and (whichever is stated) the bases of valuation used by them.

17.  In relation to any amount which is included under Asset item B.I (land and buildings) there must be stated:

(a)how much of that amount is ascribable to land of freehold tenure and how much to land of leasehold tenure;

(b)how much of the amount ascribable to land of leasehold tenure is ascribable to land held on long lease and how much to land held on short lease; and

(c)how much of that amount is ascribable to land and buildings occupied by the society for its own activities.

Investments

18.—(1) In respect of the amount of each item which is shown in the society’s balance sheet under Assets item B (investments), or in the case of a non-directive society’s balance sheet, Assets item A (investments), there must be stated:

(a)how much of that amount is ascribable to listed investments; and

(b)how much of any amount so ascribable is ascribable to investments as respects which there has been granted a listing on a recognised investment exchange other than an overseas investment exchange within the meaning of the Financial Services Act 1986(2) and how much to other listed investments.

(2) In the case of each amount shown in respect of listed securities, under sub-paragraph (1)(a), there must also be given the aggregate market value of the securities if it differs from the amount shown.

Reserves and provisions

19.—(1) Where any amount is transferred:

(a)to or from any reserves;

(b)to any provisions for liabilities and charges; or

(c)from any provision for liabilities and charges otherwise than for the purpose for which the provision was established,

and the reserves or provisions are or would but for regulation 6(3) above be shown as separate items in the society’s balance sheet, the information mentioned in the following sub-paragraph must be given in respect of the aggregate of reserves or provisions included in items in the balance sheet to which any such transfer relates.

(2) That information required by this paragraph is:

(a)the amount of the reserves or provisions as at the date of the beginning of the financial year and as at the balance sheet date respectively; and

(b)any amounts transferred to or from the reserves or provisions during that year.

(3) Particulars must be given of each provision included in Liabilities item E.3 (other provisions) in the society’s balance sheet in any case where the amount of that provision is material.

Provision for taxation

20.  The amount of any provision for deferred taxation much be stated separately from the amount of any provision for other taxation.

Details of indebtedness

21.—(1) In respect of each item shown under “creditors” in the society’s balance sheet there must be stated:

(a)the aggregate amount of any debts included under that item which are payable or repayable otherwise than by instalments and fall due for payment or repayment after the end of the period of five years beginning with the day next following the end of the financial year; and

(b)the aggregate amount of any debts so included which are payable or repayable by instalments any of which fall due for payment after the end of that period, and in the case of debts within sub-paragraph (b) above the aggregate amount of instalments falling due after the end of that period must also be disclosed for each such item.

(2) Subject to sub-paragraph (3), in relation to each debt falling to be taken into account under sub-paragraph (1), the terms of payment or repayment and the rate of any interest payable on the debt must be stated.

(3) If the number of debts is such that, in the opinion of the committee members, compliance with sub-paragraph (2) would result in a statement of excessive length, it must be sufficient to give a general indication of the terms or repayment and the rates of any interest payable on the debts.

(4) In respect of each item shown under “creditors” in the society’s balance sheet there must be stated:

(a)the aggregate amount of any debts included under that item in respect of which any security has been given by the society; and

(b)an indication of the nature of the securities so given.

(5) References above in this paragraph to an item shown under “creditors” in the society’s balance sheet include references, where amounts falling due to creditors within one year and after more than one year are distinguished in the balance sheet:

(a)in a case within sub-paragraph (1), to an item shown under the latter of those categories; and

(b)in a case within sub-paragraph (4), to an item shown under either of those categories,

and references to items shown under “creditors” include references to items which would but for Regulation 6(3) above be shown under that heading.

Guarantees and other financial commitments

22.—(1) Particulars must be given of any charge on the assets of the society to secure the liabilities of any other person, including, where practicable, the amount secured.

(2) The following information must be given with respect to any other contingent liability not provided for (other than a contingent liability arising out of an insurance contract):

(a)the amount or estimated amount of that liability;

(b)its legal nature;

(c)whether any valuable security has been provided by the society in connection with that liability and if so, what.

(3) There must be stated, where practicable:

(a)the aggregate amount or estimated amount of contracts for capital expenditure, so far as not provided for in the balance sheet; and

(b)the aggregate amount or estimated amount of capital expenditure authorised by the committee of management which has not been contracted for.

(4) Particulars must be given of:

(a)any pension commitments included under any provision shown in the society’s balance sheet; and

(b)any such commitments for which no provision has been made,

and where any such commitment relates wholly or partly to pensions payable to past committee members of the society separate particulars must be given of that commitment so far as it relates to such pensions.

(5) Particulars must also be given of any other financial commitments, other than commitments arising out of insurance contracts, which:

(a)have not been provided for in the balance sheet; and

(b)are relevant to assessing the society’s state of affairs.

(6) Commitments within any of the preceding subparagraphs undertaken on behalf of or for the benefit of any subsidiary of the society, must be stated separately from the other commitments.

Dealings with or interests in subsidiaries and jointly controlled bodies

23.  Where a society is required by Part I of Schedule 2 to be shown in the society’s balance sheet in relation to its subsidiary and jointly controlled bodies includes:

(a)amounts attributable to dealings with or interests in subsidiary or jointly controlled body; or

(b)amounts attributable to dealings with or interests in any subsidiary of the society,

the aggregate amounts within paragraphs (a) and (b) respectively must be shown as separate items, either by way of subdivision of the relevant item in the balance sheet or in a note to the society’s accounts.

Separate statement of certain items of income and expenditure

24.—(1) Subject to the following provisions of this paragraph, each of the amounts mentioned below must be stated.

(2) The amount of the interest or any similar charges in respect of:

(a)bank loans and overdrafts, and loans made to the society (other than bank loans and overdrafts) which:

(i)are repayable otherwise than by instalments and fall due for repayment before the end of the period of five years beginning with the day next following the end of the financial year; or

(ii)are repayable by instalments the last of which falls due for payment before the end of that period; and

(b)loans of any other kind made to the society.

• This sub-paragraph does not apply to interest or charges on loans to the society from jointly controlled bodies and subsidiaries, but, with that exception, it applies to interest or charges on all loans, whether made on the security of debenture or not.

(3) The amount of income from listed investments.

(4) The amount charged to revenue in respect of sums payable in respect of the hire of plant and machinery and vehicles.

Taxation

25.—(1) The basis on which the charge for United Kingdom corporation tax and deferred tax is computed must be stated.

(2) Particulars must be given of any special circumstances which affect liability in respect of taxation of income or capital gains for the financial year or liability in respect of taxation of income or capital gains for succeeding financial years.

(3) The following amounts must be stated:

(a)the amount of the charge for United Kingdom corporation tax;

(b)if that amount would have been greater but for relief from double taxation, the amount which it would have been but for such relief; and

(c)the amount of the charge for taxation imposed outside the United Kingdom of income and (so far as charged to revenue) capital gains.

• Those amounts must be stated separately in respect of each of the amounts which is shown under the following items in the income and expenditure account, that is to say item III.9 (tax on ordinary activities) and item III.14 (tax on extraordinary gain or loss).

Particulars of business

26.—(1) As regards general business a society must disclose:

(a)gross premiums written;

(b)gross premiums earned;

(c)gross claims incurred;

(d)gross operating expenses; and

(e)the reinsurance balance.

(2) The amounts required to be disclosed by sub-paragraph (1) must be broken down between direct insurance and reinsurance acceptances, if reinsurance acceptances amount to 10 per cent. or more of gross premiums written.

(3) Subject to sub-paragraph (4) below, the amounts required to be disclosed by sub-paragraphs (1) and (2) above with respect to direct insurance must be further broken down into the following groups of classes:

(a)accident;

(b)sickness; and

(c)miscellaneous financial loss,

where the amount of the gross premiums written in direct insurance for each such group exceeds 10 million ECUs.

(4) The society must in any event disclose the amounts relating to the three largest groups of classes in its business.

27.—(1) As regards long term business, the society must disclose:

(a)gross premiums written; and

(b)the reinsurance balance.

(2) Subject to sub-paragraph (3) below:

(a)gross premiums written must be broken down between those written by way of direct insurance and those written by ways of reinsurance; and

(b)gross premiums written by way of direct insurance must be broken down:

(i)between individual premiums and premiums under group contracts;

(ii)between periodic premiums and single premiums; and

(iii)between premiums from non-participating contracts, premiums from participating contracts and premiums from contracts where the investment risk is borne by members or policy holders.

(3) Disclosure of any amount referred to in sub-paragraph (2)(a) or (2)(b)(i), (ii) or (iii) above must not be required if it does not exceed 10 per cent. of the gross premiums written or (as the case may be) of the gross premiums written by way of direct insurance.

28.—(1) Subject to sub-paragraph (2) below, there must be disclosed as regards both general and long term business the total gross direct insurance premiums resulting from contracts concluded by the society:

(a)in the member State of its head office;

(b)in the other member States; and

(c)in other countries.

(2) Disclosure of any amount referred to in sub-paragraph (1) above would not be required if it does not exceed 5 per cent. of total gross premiums.

Commissions

29.  There must be disclosed the total amount of commissions for direct insurance business accounted for in the financial year, including acquisition, renewal, collection and portfolio management commissions.

Miscellaneous matters

30.—(1) Where any amount relating to any preceding financial year is included in any item in the income and expenditure account, the effect must be stated.

(2) Particulars must be given of any extraordinary income or charges arising in the financial year.

(3) The effect must be stated of any transactions that are exceptional by virtue of size or incidence though they fall within the ordinary activities of the society.

(4) Particulars must be given of any case where the cost of any asset is for the first time determined under paragraph 29 of Schedule 6 below.

(5) There must be shown the amount of the remuneration of the auditors and their associates (and where remuneration is paid to auditors or their associates for non-audit services, that remuneration must be shown separately) and actuaries, including any sums paid by the society in respect of the auditors' or actuary’s expenses.

(6) For the purpose of determining whether a person is to be regarded as an associate of a society’s auditor and for determining the remuneration paid to auditors or their associates for non-audit services, the Companies Act 1985 (Disclosure of Remuneration for Non-audit Work) Regulations 1991(3) have effect as if any reference to a company includes a reference to a society.

(7) Where management and agency services are provided by the society to third parties that fact must be disclosed where the scale of such services is material in the context of the society’s business as a whole.

Committee members' loans and transactions

31.—(1) This paragraph applies, subject to subparagraph (5), in relation to:

(a)loans from and other transactions and arrangements with the society described in section 65 of the Building Societies Act 1986(4) (as applied to friendly societies by paragraph 9 of Schedule 11 to the Act) (which restricts loans to and other transactions and arrangements with directors and persons connected with them), other than those to which section 65(5) and (6) of the Building Societies Act 1986 (as applied to friendly societies by paragraph 9 of Schedule 11 to the Act) applies; and

(b)in the case of a group accounts society, loans from and other transactions and arrangements with a subsidiary of the society to which paragraph (a) would apply were the society rather than the subsidiary a party to them.

(2) The notes to the annual accounts must contain a statement, in relation to such loans, transactions, and arrangements showing as follows:

(a)the aggregate amounts outstanding under them at the end of the financial year; and

(b)the numbers of persons for whom such loans, transactions and arrangements were made.

(3) The notes to the annual accounts must, in relation to any loan or other transaction or arrangement subsisting during or at the end of the financial year, make the following disclosures:

(a)where a copy of it or a memorandum of its terms is included in the register maintained under section 68 of the Building Societies Act 1986 (as applied to friendly societies by paragraph 9 of Schedule 11 to the Act, (which requires the maintenance of such a register), the existence of the register and the availability of requisite particulars from it for inspection shall be disclosed;

(b)where it comes within subparagraph (1)(b), its particulars shall be disclosed unless it was one which would, had the subsidiaries of the society formed part of the society, have been expected from the obligations imposed by section 68 of the Building Societies Act 1986 (as applied to friendly societies by paragraph 9 of Schedule 11 to the Act).

(4) Regulation 8(2)(b) does not apply to this paragraph.

(5) This paragraph applies in relation to loans to, and other transactions and arrangements with, a person connected with a committee member of the society where the society (or in the case of a subsidiary incorporated in the United Kingdom, the subsidiary) has notice of the connection between that committee member and that person.

Industrial Assurance

32.  Where a society transacts industrial assurance business, the industrial assurance fund maintained in accordance with section 8 of the Industrial Assurance Act 1923(5) may be shown.