liabilities” would be those tax liabilities for which no liability has been included in the accounts.
4Financial Statements of Limited Companies
4.1 The financial statements of limited companies are required to give a true and fair view of the profits or losses for the year ended on the balance sheet date and of the balance sheet drawn up to the balance sheet date. It was the Companies Act 1929 or earlier that moved away from the concept that accounts were capable of being accurate or correct and could be certified by the auditors as being so. It is the background of uncertainties and imprecision, described above, which means that directors have a duty to prepare accounts which give a true and fair view, rather than accounts which are correct. 4.2 It is for the same reason that auditors do not certify accounts to be correct, but rather give their opinion as to whether the accounts give a true and fair view and are prepared in accordance with statutory requirements. 4.3 Under the UK Companies Acts, statutory financial statements are prepared for a period to an accounting reference date. That period starts on the day following the previous accounting reference date (or the date of incorporation for a new company). 4.4 For companies incorporated under the Companies Acts and preparing their accounts in accordance with UK GAAP, the contents of the financial statements and rules relating to their presentation and measurement are provided by the Companies Acts, by a few remaining Statements of Standard Accounting Practice (“SSAPs”), by Financial Reporting Standards (“FRSs”), and by Urgent Issue Task Force Abstracts (“UITFs”). 4.5 Companies preparing their accounts in accordance with International Financial Reporting Standards (“IFRS”) are given a looser rein with regard to format under the Companies Acts. It is very common for listed and AIM companies to prepare their consolidated financial statements in accordance with IFRS, but to retain UK GAAP for the financial statements of the individual companies. One reason for this is that IFRS can have a very marked effect in reducing the distributable reserves of holding companies.
4.6 A set of consolidated financial statements is essentially an aggregation of a holding company and all of its subsidiary undertakings. It is then necessary to:
carry out consolidation adjustments in order to eliminate intra-group trading transactions and balances;
cancel the effects of profits made on transferring assets within the group to the extent that those profits have not been realised at the group level;
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