MASTERS_LEGAL_COSTS_SERVI - Accounts

The members of the limited liability partnership have elected not to include a copy of the profit and loss account within the financial statements.

For the financial period ended 30 April 2018 the limited liability partnership was entitled to exemption from audit under section 477 of the Companies Act 2006 (as applied by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) relating to small limited liability partnerships.

The members acknowledge their responsibilities for complying with the requirements of the Act (as applied to limited liability partnerships) with respect to accounting records and the preparation of accounts.

These financial statements have been prepared and delivered in accordance with the provisions applicable to limited liability partnerships subject to the small limited liability partnerships regime.

Masters Legal Costs Services LLP is a limited liability partnership incorporated in England and Wales. The registered office is 3-4 New Street, Bishopsgate, London, EC2M 4HD.

These financial statements have been prepared in accordance with the Statement of Recommended Practice "Accounting by Limited Liability Partnerships" issued in January 2017, together with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The financial statements are prepared in sterling, which is the functional currency of the limited liability partnership. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

Turnover represents the value of services provided, net of value added tax. Income is recognised for all work billed to clients for unbilled work in progress where the net realisable value of such work is known, or can be reasonably estimated. The Limited Liability Partnership's turnover is derived from its principal activity. All turnover is derived form the Limited Liability Partnership's United Kingdom office.

In determining the value of accrued income, a full review is performed and the matters are valued according to the contract terms at 30 April. Whilst this method is consistent year on year, these recovery rates may not ultimately be recovered.

If, at the reporting date, completion of the contractual obligations is dependent on external factors (and thus outside the control of the Limited Liability Partnership), then revenue is recognised only when the event occurs. In such cases, costs incurred up to the reporting date are carried forward as work in progress.

Members' participation rights are the rights of a member against the LLP that arise under the members' agreement (for example, in respect of amounts subscribed or otherwise contributed remuneration and profits).

Members' participation rights in the earnings or assets of the LLP are analysed between those that are, from the LLP's perspective, either a financial liability or equity, in accordance with section 22 of FRS 102. A member's participation rights including amounts subscribed or otherwise contributed by members, for example members' capital, are classed as liabilities unless the LLP has an unconditional right to refuse payment to members, in which case they are classified as equity.

All amounts due to members that are classified as liabilities are presented within 'Loans and other debts due to members' and, where such an amount relates to current year profits, they are recognised within ‘Members' remuneration charged as an expense’ in arriving at the relevant year’s result. Undivided amounts that are classified as equity are shown within ‘Members' other interests’. Amounts recoverable from members are presented as debtors and shown as amounts due from members within members’ interests.

Where there exists an asset and liability component in respect of an individual member’s participation rights, they are presented on a gross basis unless the LLP has both a legally enforceable right to set off the recognised amounts, and it intends either to settle on a net basis or to settle and realise these amounts simultaneously, in which case they are presented net.

Once an unavoidable obligation has been created in favour of members through allocation of profits or other means, any undrawn profits remaining at the reporting date are shown as ‘Loans and other debts due to members’ to the extent they exceed debts due from a specific member.

Intangible fixed assets represent goodwill arising on the valuation placed by the Designated Members of the LLP on the acquisition of the trade from the former partnership, Masters Legal Costs Services, on 1 May 2007. Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses.

Amortisation is charged so as to allocate the cost of intangibles less their residual values over their estimated useful lives, using the straight-line method. Goodwill is being amortised over 10 years from the date of transition to FRS 102.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Residual value is calculated on prices prevailing at the reporting date, after estimated costs of disposal, for the asset as if it were at the age and in the condition expected at the end of its useful life.

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

The limited liability partnership has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the limited liability partnership's statement of financial position when the limited liability partnership becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets are classified into specific categories. The classification depends on the nature and purpose of the financial assets and is determined at the time of recognition.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the limited liability partnership transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the limited liability partnership after deducting all of its liabilities.

Basic financial liabilities, including creditorstrade and other creditors, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest.

Financial liabilities are derecognised when the limited liability partnership’s obligations expire or are discharged or cancelled.

Equity instruments issued by the limited liability partnership are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the limited liability partnership.

The costs of short-term employee benefits are recognised as a liability and an expense.

For defined contribution schemes the amount charged to the profit or loss is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments.

On retirement members are entitled to receive the balance on their capital and loan accounts prior to the allocation of the cumulative amortisation charged. The additional sum payable is referred to as members retirement funds as per note 7 of the financial statements.

The average number of persons (excluding members) employed by the partnership during the period was 36 (2017 - 31).

The bank overdraft is secured by personal guarantees of the equity members.

Included within other creditors is a sales finance loan of £608,000 (2017 - £520,000) secured by a debenture over the trade debtors of the Limited Liability Partnership and by personal guarantees of the equity members.

In the event of a winding up of the Limited Liability Partnership, the net proceeds from the realisation of assets would be applied as follows:

1. Repay sales finance loan, secured by debenture on trade debtors.
2. Repay bank overdraft, secured by personal guarantees of equity members.
3. Repay HMRC for arrears of taxes, national insurance contributions etc.
4. Repay other unsecured creditors.
5. Repay expenses of winding up Limited Liability Partnership affairs.
6. Repay expenses of members that are borne or reimbursed by the Limited Liability Partnership.
7. Repay members’ current accounts.
8. Repay members’ capital accounts.
9. Repay members’ retirement funds.
10. Divide any residual balance among equity members.

There are no provisions within the members’ agreements to rank members’ loan and other debts above unsecured creditors.

At the reporting end date the limited liability partnership had outstanding commitments for future minimum lease payments under non-cancellable operating leases totalling £532,510 (2017 - £695,000).