Book Review - STEP Accounting Guidelines (second edition)

Sunday, 01 September 2013
Paul Seal, STEP Board Treasurer reviews the 2nd Edition of STEP Accounting Guidelines.

When the first edition of STEP Accounting Guidelines was published it marked a real advance to encourage trust and estate practitioners to produce meaningful accounts prepared to a standard template. I recall, when I worked for firms of accountants, that we used to recoil in horror at some of the documentation produced by, generally, solicitors in relation to trust and estate accounts. The information was all there but, rather like Eric Morecambe and Andre Previn, not necessarily in the right order.

The guidelines cover the principles to be adopted in preparing accounts, the distinction between capital and income, accounting records and accounts formats. The guidelines rightly, in my view, indicate that all estate and trust accounts contain a synopsis of significant events, although my preference is, particularly in relation to trust accounts, that the synopsis also includes a timeline of important events. Thus, for example, dates on which the ten-yearly charge is due and when major capital advances took place. It helps to put the trust in context.

There are one or two occasions where applying dates to some of the examples would have helped to extend the otherwise impeccable clarity. Certainly that would help in the discussion of accrued income, where, for example, if accrued income is purchased in the 2012/2013 tax year but the first interest is not received until 2013/2014, relief is only available in 2013/2014. Equally, some indication in relation to tax could have indicated that, even in the case of interest in possession trusts, accrued income profits are taxed at the trust rates even though they are properly treated as capital.

The first edition contained examples covering roughly 40 pages. By having the examples online, and available to download, the opportunity has been taken to include many more examples, and these now extend to 192 pages. They are a clear set of standard accounts for all circumstances that, if adopted by practitioners, would increase the clarity of information provided to both professionals and beneficiaries of estates and trusts. Even today, some clients who inherit on the death of a relative have neither estate accounts nor R185s; preparing both should be standard procedure.

It is the duty of a reviewer to have one or two minor quibbles, and I note, in particular, the reference to optional audit under s22(4) of the Trustee Act 1925, except in exceptional circumstances, no more than once every three years. As a recovering auditor I should say that it is not possible to have a single year audited in isolation. So, for example, if the year to 5 April 2014 was to be audited the auditor would also have to audit the balance sheet at 5 April 2013 so they could be assured that the balances forward were correct. Inevitably, the cost of an ‘audit’ will be significantly more than the fee normally charged for annual accounts.

That said, this is a superb publication. It is clear in its examples and it is clear in its explanation of issues in relation to accounts preparation. It is a measure of its standing that other professional bodies, including the Institute of Chartered Accountants in Scotland, recommend it to their members as the standard work on trust and estate accounting. It should be mandatory supplementary reading for all STEP students, and at a modest GBP35 for members should appear on every TEP’s bookshelf. Just because you have the first edition does not mean you should neglect this, which contains so much more information. The trust or estate accounts are a shop window – they go to all manner of individuals who may, otherwise, never have considered contacting you. Clear and reliable accounts will enhance your standing with other professionals and demonstrate your competence. Equally, from my perspective as an accountant, badly drafted accounts make me wonder what else was slapdash – with an inevitable conclusion. Buy a copy today!

Author: Jonathan Cooke

Publisher: STEP and CLT International

ISBN: 978-0-9550262-5-6

Price: GBP45

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Paul Seal

Paul Seal is the STEP Board Treasurer.

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