FIRST SCHEDULE.—(Accounts.) (Hansard, 28 July 1947)

§ The Solicitor-General
I beg to move, in page 109, line 33, to leave out from the beginning, to the end of line 43, and to insert: and for the purposes of this paragraph the net amount at which any assets stand in the company's books at the date of the coming into force of this Schedule (after deduction of the amounts previously provided or written off for depreciation or diminution in value) shall, if the figures relating to the period before that date cannot be obtained without unreasonable expense or delay, be treated as if it were the amount of a valuation of those assets made at that date and, where any of those assets are sold, the said net amount less the amount of the sales shall be treated as if it were the amount of a valuation so made of the remaining assets. This is very largely a drafting Amendment to the provisions of the First Schedule, which is the Schedule which sets out what a company has to include in its balance sheet and profit and loss account. It really effects a drafting Amendment to the provisions of paragraph 2, which sets out how the fixed assets of a company are to be valued for the purpose of its balance sheet. What it does is to say that where you have, in the case of an asset acquired before the date when the Schedule comes into force difficulty in ascertaining past facts regarding acquisition and sales made out of it, all you need do is bring in a net figure of amounts written for depreciation up to the date. It is designed to deal with cases in which you have a lot of tools or small items, and it is not feasible to trace purchases or sales, and to avoid otherwise unnecessary work.

§ The Solicitor-General
I beg to move, in page 112, line 34, at the end, to insert: and the Stock Exchange value of any investments of which the market value is shown (whether separately or not) and is taken as being higher than their Stock Exchange value. 211 This Amendment deals with the valuation of a company's aggregate investments other than trade investments. Hon. Members will find that paragraph 7 of the First Schedule specifies how certain items, which are to be set out separately, are to be dealt with, and that certain things have to be done by way of note, or statement or report annexed. If hon. Members will look at paragraph 8, they will see how the aggregate market value of investments other than trade investments of companies is to be set out. The Amendment is designed to meet an argument by the hon. Member for Bury (Mr. W. Fletcher). Where a finance company held a considerable block of shares, if shares were unloaded on to the market suddenly, you would get a very different value from the quoted Stock Exchange prices of the shares, and it would be misleading to put in the quoted prices. Therefore, what we say is that in any case where the market value is shown as being higher than the Stock Exchange value, and the directors of the company wish to include trading investments at a value higher than the Stock Exchange value, the Stock Exchange value has to be shown separately, set out in a note or statement annexed.

§ Sir S. Cripps
I beg to move, in page 114, line 28, at the end, to insert: otherwise than by way of security only for the purposes of a transaction entered into by it in the ordinary course of a business which includes the lending of money. The object of this Amendment is to exclude from the requirements of Subparagraph (1) (iii), shares and debentures by way of security only in the ordinary course of business. The exception made is in line with that in Clause 82.

§ The Solicitor-General
I beg to move, in page 115, line 33, after "subsidiaries," to insert: except that they may in a proper case be so treated where—

(a) the company is itself the subsidiary of another body corporate; and

(b) the shares were acquired from that body corporate or a subsidiary of it."

This again is an Amendment to the First Schedule and deals with the case of a holding company with a subsidiary 212 company. Paragraph 5 deals with the case of profit and loss of a subsidiary company being brought into the accounts. What the Amendment seeks to do is this. If one looks at paragraph 5, it will be seen that it provides that one should not take pre-acquisition profits of a subsidiary company as revenue in the accounts of the holding company: that is to say, profits which the subsidiary company makes before it is acquired. Obviously, when they come into possession, when the subsidiary company has been acquired, they should not be treated by the holding company as part of the revenue, but should be treated as capital, because they would have increased the price which had been paid by the holding company to acquire the subsidiary company. That should not necessarily apply in the case of the acquisition of a company from outside the group. A company which is not outside the group, but was acquired does not necessarily come Within the same group What the Amendment does is this: It says that in such a case, where the directors think proper, the pre-acquisition profits of the subsidiary may be treated as the revenue of the holding company, but it is wholly within the discretion of the directors.

§ Mr. Eric Fletcher (Islington, East)
Do I understand from the Solicitor-General that it lies with the opinion of the directors whether it is a proper case or not?

§ The Solicitor-General
In the opinion of those charged with that particular duty and the management of the company's affairs. It will only be done in the proper case. The emphasis is on that.