Current Cost Reserve

The current cost balance sheet includes a reserve in addition to those included in historical cost accounts. The additional reserve may be referred to as the current cost reserve. The total reserves will include, where appropriate:

(a) unrealized revaluation surpluses on fixed assets, inventories and investments; and

(b) realized amounts equal to the cumulative net total of the current cost adjustments, that is:

(i) the depreciation adjustment (and any adjustments on the disposal of fixed assets);

(ii) the two working capital adjustments; and

(iii) the gearing adjustment.


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Read on: Distributable Profit: Interpretation and Limitations

Distributable profit: interpretation and limitations

SSAP 16 considers the relationship between current cost accounting and distribution policy as follows:

'The amounts that can prudently be distributed depend not only on profitability, but also on the availability of funds. This is so with all systems of accounting. When determining distribution policy, consideration must be given to factors not reflected in profit, such as capital expenditure plans, changes in the volume of working capital, the effect on funding requirements of changes in production methods and efficiency, liquidity,... see: Distributable Profit: Interpretation and Limitations