Commentary on Sections Overview Chapter 3: Credits and debits to be brought into account: general Section 597: Amounts recognised in determining a company’s profit or loss
1609.This section explains what “an amount recognised in determining a company’s profit and loss” means. It is based on paragraph 17B of Schedule 26 to FA 2002.
1610.The various statements listed in paragraphs (a) and (b) of subsection (1) are those mentioned in UK generally accepted accounting practice or international accounting standards. But subsection (1)(c) caters for amounts recognised in any accounting statement not among those listed.
1611.The statements listed in paragraphs (a) and (b) of subsection (1) include a “statement of comprehensive income”, “statement of recognised income and expense” and “statement of income and retained earnings”. These statements are not mentioned in the source legislation but are the equivalents in more recently applying accounting standards of the statements listed there.
1612.So far as the terms in those paragraphs derive from accounting standards, they are defined in section 710 as having the meaning they have for accounting purposes.
1613.Subsection (2) brings in prior period adjustments for this purpose but subsection (3) excludes amounts recognised “by way of correction of a fundamental error”. Such amounts are brought into account in the prior period affected by the error (so that the amounts so brought into account “fairly represent” profits and losses etc in respect of the contract in that period).
1614.See also sections 613 to 615 for the treatment of adjustments shown in accounts on a change of accounting policy.