Members' participation rights in the earning or assets of the LLP are analysed between those that are, from the
LLP's perspective, either a financial liability or equity. A member's participation right results in a liability unless
the right to any payment is discretionary on the part of the LLP.
Conversely, where profits are divided only after a decision by the LLP or its representative, so that the LLP has
an unconditional right to refuse payment, such profits are classed as an appropriation of equity rather than as an
expense. They are therefore shown as a residual amount available for discretionary division among members in
the Profit and Loss Account and are equity appropriations in the Balance Sheet.
Other amounts applied to members, for example interest on capital balances, are treated in the same way as all
other divisions of profits, as described above, according to whether the LLP has, in each case, an unconditional
right to refuse payment.
All amounts due to members are classified as liabilities and are presented in the Balance Sheet as 'Loans and
other debts due to members' and are charged to the Profit and Loss Account within 'Members' remuneration
charged as an expense'. Amounts due to members that are classified as equity are shown in the Balance Sheet
within 'Members' other interests'.