Companies Act 2014 section 120

Development costs shown as asset of company to be set off against company's distribution profits

Section 120 deals with how development costs carried as an asset on a company's balance sheet affect the calculation of profits available for distribution.

• Development costs shown as an asset in the financial statements must generally be treated as a realised loss, reducing the profits available for distribution.
• Any unrealised profit arising from the revaluation of development costs is exempt from this requirement and need not be treated as a realised loss.
• Directors may disapply the rule if special circumstances justify their decision, provided they disclose this decision and explain the circumstances in a note to the financial statements.
• The required disclosure note must appear in the location specified by paragraph 24(2) of Schedule 3 or Schedule 3A for Companies Act entity financial statements, or in any note for IFRS entity financial statements.