Distributable profits: Updating the guidance
Ken Rigelsford highlights important changes that are being made to the UK’s guidance on distributable profits in the wake of the new UK GAAP.
The distinction between realised and unrealised profits is important because dividends can be paid only out of realised profits. Also, for companies reporting under UK GAAP, unrealised profits cannot be included in the profit and loss account unless they arise from the use of the fair value accounting rules. The Financial Reporting Lab’s recent publication Disclosure of dividends – Policy and practice – which is discussed further in the article on the opposite page – has highlighted calls for greater transparency around the disclosure of distributable reserves by listed companies.