Statement of Standard Accounting Practice (SSAP)

Definition

Statement of Standard Accounting Practice (SSAP) refers to any of a series of accounting standards issued by the Accounting Standards Committee (ASC) between 1971 and 1990. The purpose of these standards was to provide a systematic and consistent approach to accounting procedures and financial reporting across various companies and industries. While some of these standards have been replaced by Financial Reporting Standards (FRSs) over time, SSAPs have played a crucial role in shaping Modern UK Accounting practices. Ultimately, all SSAPs have been superseded by the Financial Reporting Standard applicable in the UK and the Republic of Ireland.

List of Notable SSAPs:

1. Accounting for the Results of Associated Companies
2. Disclosure of Accounting Policies
3. Earnings per Share
4. The Accounting Treatment of Government Grants
5. Accounting for Value Added Tax (VAT)
6. Extraordinary Items and Prior Year Adjustments
7. Accounting for the Changes in the Purchasing Power of Money (provisional)
8. The Treatment of Taxation under the Imputation System
9. Stocks and Work in Progress
10. Statement of Sources and Application of Funds
11. Accounting for Deferred Taxation
12. Accounting for Depreciation
13. Accounting for Research and Development
14. Group Accounts
15. Accounting for Deferred Taxation (revised version)
16. Current Cost Accounting
17. Accounting for Post Balance Sheet Events
18. Accounting for Contingencies
19. Accounting for Investment Properties
20. Foreign Currency Translation
21. Accounting for Leases and Hire Purchase Contracts
22. Accounting for Goodwill
23. Accounting for Acquisitions and Mergers
24. Accounting for Pension Costs
25. Segmental Reporting

Examples

Example 1: Disclosure of Accounting Policies (SSAP 2)

A company is required to disclose its accounting policies in its annual financial statements. For example, if a company decides to value its inventory using the First-In-First-Out (FIFO) method, this needs to be explicitly stated in the disclosure sections to inform stakeholders of the company’s accounting practices.

Example 2: Earnings per Share (SSAP 3)

When a public company reports its earnings, it needs to calculate and disclose earnings per share (EPS) to provide investors with insight into profitability. EPS is calculated by dividing the net income by the number of outstanding shares.

Example 3: Accounting for Depreciation (SSAP 12)

A company must determine the method for depreciating its fixed assets. Whether it uses straight-line depreciation or declining balance method, SSAP 12 requires that these methods be consistently applied and disclosed in the financial statements.

Example 4: Accounting for Government Grants (SSAP 4)

A company receiving a government grant must account for it according to specific guidelines. SSAP 4 dictates the method of recognizing such grants, either as deferred income or deducting it from the related expense.

Frequently Asked Questions (FAQs)

Q1: What is the purpose of SSAPs?

A1: SSAPs were developed to establish a common framework for accounting practices and ensure consistency, transparency, and reliability in financial reporting.

Q2: Are SSAPs still in use today?

A2: No, SSAPs have been entirely superseded by the Financial Reporting Standard applicable in the UK and the Republic of Ireland and replaced by various Financial Reporting Standards (FRSs).

Q3: Who issued SSAPs?

A3: The Accounting Standards Committee (ASC) issued SSAPs from 1971 to 1990.

Q4: Can companies choose not to follow an SSAP when preparing financial statements?

A4: While in effect, adherence to SSAPs was mandatory to ensure compliance with best accounting practices unless there was a justified reason for deviation, which had to be disclosed and explained.

Q5: How did SSAPs affect international accounting standards?

A5: While SSAPs were tailored for the UK and Ireland, they contributed to the foundation of international accounting standards by promoting transparency and comparability across financial statements.

Related Terms

Financial Reporting Standards (FRS)

A series of standards that have replaced SSAPs and provide guidelines for financial reporting to ensure accuracy and consistency.

Generally Accepted Accounting Principles (GAAP)

Guidelines and standards used by accountants to prepare, present, and report financial statements in the US.

International Financial Reporting Standards (IFRS)

Global accounting standards developed by the International Accounting Standards Board (IASB) to ensure uniformity and transparency in financial reporting across international borders.

Online References

1. Financial Reporting Council (FRC) Official Website
2. International Accounting Standards Board (IASB)
3. Institute of Chartered Accountants in England and Wales (ICAEW)

Suggested Books for Further Studies

1. “Financial Accounting and Reporting” by Barry Elliott, Jamie Elliott
2. “UK GAAP 2019: Generally Accepted Accounting Practice under UK and Irish GAAP” by Ernst & Young LLP
3. “Principles of Group Accounting under IFRS” by Andreas Krimpmann
4. “Accounting Made Simple: Accounting Explained in 100 Pages or Less” by Mike Piper

Accounting Basics: “Statement of Standard Accounting Practice (SSAP)” Fundamentals Quiz

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