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HMRC internal manual

Life Assurance Manual

Trade profits: Financial statements: the fund for future appropriations (FFA) and unallocated divisible surplus (UDS)

The FFA is the excess of assets over policyholder liabilities in a with-profit fund after bonuses for the year are declared and allocated to policyholders and after the shareholders’ share is determined. IFRS calls this balance the UDS and allows some flexibility over its presentation though typically in the UK it is included in its entirety within liabilities.

The FFA is defined in the Companies Act 2006 as ‘all funds the allocation of which either to policyholders or to shareholders has not been determined by the end of the financial year’. This balance represents the cumulative amount available for allocation to policyholders in the future. Technically the balance represents in part obligations to policyholders and in part shareholders’ funds, though in the UK it is presented as a liability immediately after shareholders’ funds.

Transfers to and from the FFA or UDS must be accounted for through the technical account (or income statement) and are fully taxable or tax deductible.