Our Financial Reporting Expert Group contributed to our response to the ICAEW consultation – Exposure draft on updated guidance on realised and distributable profits.
We generally supported the proposed amendments stated in the exposure draft. However, we noted that the guidance stipulates that an expectation of future trading losses should be taken into account when assessing whether a dividend can be paid, and supported that further clarity is needed on this. We noted that, at present, an insolvency situation could arise where it is unclear whether dividends are legal or not and whether directors have breached their fiduciary duties.
