IPRU-INV 13.10 FINANCIAL RESOURCES TEST 1- OWN FUNDS REQUIREMENT
Application
1This section applies to a personal investment firm which is a category B firm whose permission includes establishing, operating or winding up a personal pension scheme.
Requirement
Calculation
A firm's1 own funds must be calculated in accordance with table 13.10(2).
Table 13.10(2).
This table forms part of IPRU-INV 13.10.2R1.
Companies |
Sole Traders: Partnerships |
Paid-up share capital (excluding preference shares redeemable by shareholders within 2 years) Share premium account Retained profits (see 13.10.2AR) and interim net profits (Note 1) Revaluation reserves Short-term subordinated loans |
Balances on proprietor's or partners' - capital accounts - current accounts (see 13.10.2AR) Revaluation reserves Short-term subordinated loans |
less - Intangible assets |
less - Intangible assets - Material current year losses1 - Excess of current year - drawings over current year profits |
Note 1 Retained profits must be audited and interim net profits must be verified by the firm's external auditor, unless the firm is exempt from the provisions of 1Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts. |
|
For the purpose of calculating a firm's1 own funds, the following adjustments apply to retained profits or, (for non-corporate entities), current accounts figures.
- (1)
a firm's1 must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;
- (2)
- (3)
a firm's1 may substitute for a defined benefit liability its deficit reduction amount. The election must be applied consistently in respect of any one financial year;1
- (4)
a firm's1 must deduct any unrealised1 gains on investment property and include these within revaluation reserves.
- (5)
where applicable, a firm's1 must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but exclude from the deduction or addition any asset or liability which will give rise to future cash flows), together with any associated deferred tax.
A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA1 the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme.
Where a firm1 is a sole trader or a partnership:
- (1)
it can use (to the extent necessary to make up any shortfall in the required resources) any of its personal assets (not being needed to meet liabilities arising from its personal activities and any business activities not regulated by the FCA1);
- (2)
the firm's total financial resources, from whatever source, should1 at all times be sufficient to cover its total liabilities.
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