Financial review 2015

Full financial review 2015

Statement of the Council’s responsibilities
Finance Committee – Convener’s Report
Audit Committee – Convener’s Report
Independent Auditors’ Report 
Group Income and Expenditure Account
Notes to the financial statements


The Finance Committee reviewed the Society’s reserves policy in light of the proposed move from owned to leased office premises. The reserves policy is now three to six months’ average expenditure. Reserves for this purpose are defined as net current assets plus realisable investments less pension scheme deficit (from the most recent valuation less recovery plan payments made subsequently).

At 31 October 2015 this figure amounted to £3 million (excluding the final instalment of £1.25 million from the sale Drumsheugh Gardens, due in February 2017), which is equivalent to between three and four months’ expenditure. The committee regards this level as satisfactory.

Fixed assets

The sale of heritable property of 25, 26 and 27 Drumsheugh Gardens was concluded successfully for a sale price of £4.25 million, payable in two instalments - £3 million on 12th January 2016 and £1.25 million in February 2017. This transaction has been reflected in these accounts given missives were exchanged in August 2015 and the sale was subsequently completed, leading to a book gain (after corporation tax provision) of £3.14 million. 


Investments are stated at cost and not market value. The market value of investments was less than cost at the year-end. This is viewed as a result of normal market fluctuations, and not a permanent diminution in value.

As part of its review of the Society’s reserves during the year, the Finance Committee approved a transfer from cash to investments of £2 million which is reflected in the increase in investment cost in the Balance Sheet.


Cash balances at the year-end were £8.4 million. Of this sum, subscription income received in advance of 1 November 2015 was £6.4 million.

Pension debt

The Society’s defined benefit scheme was closed to future accrual from 1 May 2010. A full actuarial valuation was carried out at 31 March 2013 by a qualified actuary, independent of the scheme's sponsoring employer. The overall deficit shown by this valuation was £2 million. A deficit recovery repayment plan has been agreed with the scheme trustees which is scheduled over a seven-year period. The next triennial valuation date is 31 March 2016. 

Annual report 

The Society’s annual report includes the president and chief executive's overview of the year, sections measuring progress made against the corporate plan, a report on governance arrangements, the accounts of the Guarantee Fund and a summary of work on equality and diversity.

The Society remains committed to achieving continual improvement in its financial performance through:

  • achieving efficiencies and cost savings across the business
  • improved financial forecasting
  • growth of non-subscription incomes
  • maintenance of reserves at an appropriate level
  • managing historic final salary pension scheme liabilities through close liaison with the scheme’s trustees

Key risks 

The Society carries out ongoing monitoring and management of the risks it faces. Risks are also considered for each activity within the Society’s strategic objectives and annual plan. The risk register is reviewed monthly by the Society’s Executive team and subject to additional scrutiny by the Audit Committee, Board and Internal Auditors. Key risks include:

  • remaining liability on the closed final salary pension scheme and exposure to market risk
  • legislative change and risk of changes to current regulatory functions
  • loss of public confidence in the Society’s ability to act as an effective regulator
  • competitive pressures through alternative business structures and the future economic health of the profession
  • failure to deliver the Society’s 5-year strategy

Financial year 2015/16

The Society’s approved budget for 2015/16 left the cost of the practising certificate unchanged at £550, in accordance with the three-year fee strategy adopted by the Finance Committee in 2013. The retention fee was increased by £10 to £100 and the non-practising member fee increased by £20 to £200.

John Mulholland
26 February 2016

1 Statement of the Council’s responsibilities

The constitution of the Society requires the Council to prepare accounts for each financial year. In preparing those accounts, the Council has undertaken to:

  • select suitable accounting policies and apply them consistently
  • make suitable judgments and estimates that are reasonable and prudent
  • state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the accounts
  • prepare the accounts on a going concern basis unless it is inappropriate to presume that the Society will continue in business

The Council has considered the position for the next 12 months and concluded the use of the going concern basis of accounting is appropriate because there are no material uncertainties related to events or conditions that may cast doubt about the ability of the Society to continue as a going concern.

The Council has overall responsibility to prepare annual financial statements for each financial year, which give a true and fair view of the state of affairs of the Society and of the surplus or deficit for that period.

The Council has delegated to the Board its responsibility for the day-to-day operations, including:

  • keeping adequate accounting records, which disclose with reasonable accuracy the financial position of the Society
  • safeguarding its assets
  • taking reasonable steps for the prevention and detection of fraud and other irregularities

The Council is responsible for the maintenance and integrity of the corporate and financial information included on the Society’s website. Legislation in Scotland governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions. 

2 Finance Committee – Convener’s report

Committee members

John Mulholland (Convener and Treasurer), appointed June 2015
Suzanne Dawson
Graeme Matthews
David Newton
David Preston
Mark Sim, appointed June 2015
Ken Tudhope (Director of Finance, Secretary to the committee)

Governance and financial control 

The Treasurer chairs the Finance Committee which meets four times a year, as well as taking between-meeting decisions remotely. The aim of the Finance Committee is to ensure that annually the Society meets its corporate objectives supported by the effective and efficient use of finances and resources.

In order to achieve this, the Finance Committee will:

  • review and finalise the annual budget, in consultation with the Board, Audit Committee and senior management team, for presentation to the Council
  • review and, where appropriate, put forward proposals for the alteration of practising certificate fees and subscription levels and bandings
  • review the monthly management accounts and make appropriate recommendations
  • prepare the Society’s annual accounts and, subject to scrutiny by the Audit Committee and audited by the external auditors, approve them for submission to the Council
  • keep under review the level and nature of the Society’s own banking arrangements, investments, borrowings and insurance cover (excluding that relating to insurance of the profession) and take action where necessary or desirable • determine financial controls and propose innovations in financial management
  • maintain a register of key risks in relation to finance and resources
  • set policy and supervise the procurement process of the Society, including approving the individual award of contracts above a certain threshold amount, as set by the Finance Committee
  • provide advice on any other matters referred to it by the Board, Audit Committee, senior management team, or Council

Financial strategy

The financial strategy of the Society is to:

  • Ensure best value for members’ subscriptions. Best value means value for money can be achieved and demonstrated.
  • Provide financial resources to support the corporate plan. Consideration will be given to the cost and timing of components within the corporate plan and the departmental plans that are developed so that it is clear when resources will need to be made available. Prioritisation for financial resources takes place to ensure the most important objectives are achieved. All budget holders receive monthly income and expenditure accounts for their cost centres to enable performance against budget to be continuously monitored.
  • Maintain reserves at an acceptable level. An acceptable level has been determined to be the equivalent of at least three average months’ expenditure.


2014/15 saw the most significant financial decision made by the Society for many years, involving the sale of its premises in Drumsheugh Gardens and lease of new premises Atria One in Morrison Street, Edinburgh.

The Finance Committee scrutinised a number of financial models to support this decision, including the status-quo option and the impact of moving to other alternative premises. Income & expenditure accounts and cash flows for the 15-year lease term were produced and the assumptions behind the figures interrogated. The figures and overall governance behind the project were also reported on by the Society’s internal auditors and suitable assurance obtained. As a result the committee was happy to support the paper put to council to approve the move.

The committee also reviewed the reserves policy and the impact on the Society’s balance sheet of the proposed move to leased premises. As part of this process it decided to increase the amount of the Society’s reserves invested in balanced stockmarket portfolio in order to achieve a better investment income return and growth potential, balanced with risk and in the context of the other cash reserves.

Looking ahead, the committee’s focus in 2015/16 will include managing the cost base of the business to reflect the change in premises, and progress on delivery of the strategy to ensure the Society is not exposed to undue financial risk.

I conclude by thanking my colleagues on the Finance Committee for their diligence and observations throughout the year, in particular the former Treasurer David Newton who stood down from Council in May. I am delighted that he has agreed to remain on the Finance Committee and we will continue to benefit from his knowledge and experience.

John Mulholland
26 February 2016

3 Audit Committee – Convener’s report

Committee members

Liam McCabe (Convener)
David Bentley, retired 18 September 2015 
Simon Brown, appointed 1 January 2015
Kim Leslie, retired 14 November 2014 
Amanda Millar, appointed 1 January 2015 
Sara Scott
Richard Spilsbury
Eileen Sumpter
David Cullen (Secretary)

Governance and membership

The committee’s membership benefited from the appointment of two new Council members – Simon Brown and Amanda Millar. Both these new members have greatly enhanced the knowledge base of the committee in terms of solicitor practice.

There was one retirement from the committee this year – David Bentley – who served on the committee for just under five years. David was a valued member of the committee. His contributions, particularly in the area of the presentation and analysis of the Society’s annual audit and accounts will be much missed.

The committee’s reporting procedure remained the same as in previous years. The full committee minute is reported to the Society’s Board, with a one page summary report of each committee meeting being given to the Society’s Council. The committee convener also formally reports on the committee’s work at the annual general meeting of the Society. The secretary to the committee is the Society’s registrar.


The work of the committee is to review and report on the Society’s arrangements for audit, internal control and risk management. The committee oversees the work of the Society’s internal and external auditors. With the benefit of its consideration the work of the auditors, the committee comments and make recommendations on the effectiveness in practice of the Society’s financial policies and procedures, management controls and its arrangements to identify and manage risk.

In this context the committee reviews the following at each of its meetings:

  • progress by the Society against its corporate plan objectives especially in relation to their financial impact on the Society
  • the Society’s risk register with emphasis on changes in the risk profile and actions taken to mitigate risk

Through that regular review the Committee will question the actions and judgements of the Society’s executive, Board and office bearers in relation to the Society’s financial stewardship, safeguarding of the Society’s assets and the extent to which the Society achieves best value.

The committee oversee the Society’s relations with the external auditors. To this end it receives and comments on the Society’s annual financial statements prior to their approval by Council and receives the report from the Society’s external auditors on their work in forming their opinion on the financial statements.

The committee also commissions and oversees the delivery of an agreed programme of work from its appointed internal auditors. It will also follow up to ensure that recommendations contained in internal audit reports are implemented within a reasonable timeframe.

The committee will from time to time carry out reviews into or report on ad hoc matters as it may consider appropriate or as it is requested to do by Council or the Society’s office bearers.


The committee met on five occasions this year. The work of the Committee should be seen within the context of the Society’s overall approach to good governance as the Committee plays a key role in holding the Society’s office bearers, Council and senior leadership team to account for the management of risk and the effective operation of all risk management systems. To this end the committee can report that the internal audit system (by an external firm of accountants) completed its first full year of operation. A total of eight internal audits were carried out in the year. The internal auditors’ reviews covered the following areas of the Society’s operations:

  • Review of potential relocation project
  • Smartcard project
  • Review of IMIS system
  • IT systems
  • Budgetary & financial controls
  • Governance – regulatory sub-committees
  • Risk management
  • Follow up Review

The committee was satisfied with the overall conclusion of the internal auditors which was that the Society does have adequate and effective risk management controls and governance processes in place to achieve its long term objectives.

A major issue which the committee reviewed at the end of the year was the Society’s internal review of the regulatory systems in relation to the case of the former solicitor Christopher Hales. This review has resulted in a number of planned improvements in the Society’s regulatory processes which should be implemented in full by the end of the first quarter of next year.

The committee reviews the principal risk register of the Society at each meeting to again ensure appropriate and timeous risk management actions are taken to mitigate such risks. The committee also reviews the performance of the Society’s auditors in terms of their performance, cost and independence.

A thorough review of the risks on the register has resulted in a complete overhaul of these risks as well as the approach to risk mitigation and management. The major risks to the Society all relate to the performance and discharge of the Society’s regulatory duties.

I conclude my report by thanking all committee members for their contributions over the course of this year.

Liam McCabe
26 February 2016 

4 Independent auditors’ report to the members of the Law Society of Scotland

We have audited the accounts of the Law Society of Scotland for the year ended 31 October 2015, which comprise the income and expenditure account, the statement of total recognised gains and losses, the balance sheet, the cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

This report is made solely to the Society’s members, as a body, in accordance with relevant legal and regulatory requirements. Our audit work has been undertaken so that we might state to the Society’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Society and the Society’s members as a body, for our audit work, for this report, or for the opinions we have formed. 

Respective responsibilities of Council and auditors

As explained more fully in the statement of the Council’s responsibilities, the Council is responsible for the preparation of accounts which give a true and fair view. Our responsibility is to audit and express an opinion on the accounts in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s ethical standards for auditors.

Scope of the audit of the accounts

An audit involves obtaining evidence about the amounts and disclosures in the accounts sufficient to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Society’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Council; and the overall presentation of the accounts. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited accounts and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.

Opinion on financial statements

In our opinion, the accounts:

  • give a true and fair view of the state of the Society’s affairs as at 31 October 2015 and of its surplus for the year then ended
  • have been properly prepared in accordance with UK Generally Accepted Accounting Practice

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where we are required to report to you if, in our opinion:

  • the information given in the annual report is inconsistent in any material respect with the accounts; or
  • proper accounting records have not been kept; or
  • the accounts are not in agreement with the accounting records and returns; or
  • we have not received all the information and explanations we require for our audit

Henderson Loggie
Chartered Accountants and Statutory Auditors Edinburgh
Eligible to act as an auditor in terms of section 1212 of the Companies Act 2006
26 February 2016 

5 Group income and expenditure account

For the year ended 31 October 201

Other commercial5432500
Intervention & judicial factories61,4631,528
Interest and dividends 140141
Gain on disposal of investments 1114
Total income 10,31610,266
Representation & Professional Support121,5861,784
Central Services132,1531,984
Marketing, Communications & Other14752796
Intervention & Judicial Factories161,2031,192
VAT not recoverable 549458
Corporation tax18.14052
Loss on disposal of fixed assets 22-
Total expenditure 10,26010,150
Operational surplus/(deficit) for the year 56116
Gain on disposal of heritable property19.33,614-
Corporation tax on gain on sale18.2(479)-
Overall surplus for the year 3,191116 


6 Statement of Total Recognised Gains and Losses
Surplus for the financial year 3,191116
Actuarial movement in defined benefit pension scheme24.2(219)(189)
Total recognised gains/(losses) for the financial year 2,972(73)

7 Balance sheet – Group

for the year ended 31 October 2015

Fixed assetsNote£000£000
Heritable property19.1-586
Leasehold improvements19.11,288-
Furniture and equipment19.1626430
Listed investments at cost19.21,961218
Debtors: amounts falling due after more than one year201,250-
Current assets   
Cash in hand and at bank328,4177,009
Creditors: amounts falling due within one year21(8,792)(4,227)
Net current assets 2,6053,524
Net assets excluding pension asset and provisions 7,7304,758
Net assets including pension asset and provisions 7,7304,758
Represented by:   
Capital account237,7304,758

Christine McLintock
26 February 2015

8 Balance sheet - Society

for the year ended 31 October 2015

Fixed assetsNote£000£000
Heritable property19.1-586
Leasehold improvements19.11,288-
Furniture and equipment19.1626430
Listed investments at cost19.21,961218
Debtors: amounts falling due after more than one year201,250-
Current assets   
Cash in hand and at bank328,1256.757
Creditors: amounts falling due within one year21(8,770)(4,208)
Net current assets 2,3363,291
Net assets excluding pension asset and provisions 7,4614,525
Net assets including pension asset and provisions 7,4614,525
Represented by:   
Capital account237,4614,525

Christine McLintock
26 February 2015

9 Group cash flow statement

for the year ended 31 October 2015

Net cash inflow/ (outflow) from operating activities 25.14,139600
Returns on investments and servicing of finance   
Interest and dividends received 140141
Corporation tax paid18.1(52)(75)
Capital expenditure and financial investment   
Payments to acquire investments (1,902)(80)
Receipts from sale of investments 17079
Payments to acquire tangible fixed assets (1,087)(344)
Receipts from sale of tangible fixed assets --
Increase in cash during the year 1,408321
Net funds at the start of the year  7,0096,688
Net funds at the end of the year25.28,4177,009

10 Notes to the financial statements

for the year ended 31 October 2015

NOTE 1 Accounting policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements, except as noted below.

Basis of preparation

The financial statements have been prepared in accordance with applicable accounting standards and accounting rules modified to include the revaluation of land and buildings. The Society has applied transitional rules contained in Financial Reporting Standard 15, Tangible Fixed Assets, to retain previous valuations as the basis on which the assets are held.

Basis of consolidation

The consolidated accounts include the accounts of the Society and its subsidiary undertaking, The Law Society of Scotland Services Limited, made up to 31 October 2015.

Heritable property

Missives for the sale of Drumsheugh Gardens were concluded in August 2015 and as a result the sale, concluded in January 2016, is incorporated in these accounts. 

Leasehold improvements

Leasehold improvements are depreciated over the length of the lease.


Depreciation is calculated to write off the cost of items over their estimated useful lives as follows: Office machinery three to five years Office equipment three to ten years Office fixtures and furniture five to ten years Motor cars four years


Investments are stated at cost. Investments are only stated at below cost where the Council believes their diminution in value is permanent. Where cash is retained by the investment brokers for reinvestment, it is included within investments.

Income recognition

The Society recognises all categories of income in the period to which they relate. Membership income received that relates to future periods is held on the balances sheet as fees in advance.


The Society is liable for corporation tax on interest and dividends, chargeable investment gains and publication royalty payments. Full provision is made for corporation tax on assessable income.

Running costs

Running costs include travel, accommodation, legal fees, professional subscriptions, and other direct costs where applicable.

Pension scheme - defined benefit pension scheme

The Society operates a pension scheme providing benefits based on final pensionable pay (closed to new members from 30 June 2003 and closed to future accrual from 1 May 2010). The assets of the scheme are held separately from those of the Society. Pension scheme assets are measured using market values. Pension scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The pension scheme surplus (to the extent that it is recoverable) or deficit is recognised in full. The movement in the scheme surplus/deficit is split between operating charges, finance items and, in the statement of total recognised gains and losses, actuarial gains and losses.

Pension scheme - defined contribution pension scheme

The Society contributes to a group personal pension plan on behalf of certain employees. The assets of this scheme are held separately from those of the Society in an independently administered fund. The amount charged to the income and expenditure account represents the contributions payable to the scheme in respect of the accounting period.

Provision for liabilities

Where the Society requests the court to appoint an external Judicial Factor, the Society has a contractual obligation to meet any shortfall where the estate under administration is insufficient to meet the commission payable to the Judicial Factor as fixed by the Accountant of Court. A provision for liabilities and charges is recognised in accordance with Financial Reporting Standard 12. In cases where the Judicial Factor is internal and additional costs require to be incurred in order to carry out the work, a provision is also made. During the administration of an estate, the provision is adjusted based on the best available information.

NOTE 2 - Membership  
Practising certificate fees5,8295,727
Membership fees5352
Retention fees1,1921,041
Registered foreign lawyers242184
Financial services69301
Examinations, admissions & notaries125109
Other membership income172142
NOTE 3 - Regulation  
Scottish Solicitors’ Discipline Tribunal costs recovered138148
 NOTE 4 - Events  
Annual conference – delegate fees & sponsorship5550
Update events345317
Update sponsorship5012
NOTE 5 - Other commercial  
Service Provider Scheme2123
Journal (note 17)295328
Publications (note 17)116143
Other miscellaneous income-6
NOTE 6 - Financial compliance, interventions & judicial factories  
Accounts fees from members1,4211,411
Judicial Factor commission2270
Inspection fees2047
NOTE 7 - Council  
Travel, catering, training100105
AGM & SGM211
President's remuneration7676
Vice president's remuneration3838
NOTE 8 - Board  
Travel, training63
Board compensation (note 27)1718


NOTE 9 - Corporate  
Employment costs  (note 28)432397
Corporate office - running costs6952
Building review316
The CEO's package was £188,964  (2014 - £183,104)  
NOTE 10 - Membership  
Employment costs (note 28)721670
Conveners' compensation (note 27)4023
Registrar running costs (including Smartcard roll-out)97166
Education running costs139105
NOTE 11 - Regulation  
Employment costs (note 28)705652
Conveners' compensation (note 27)2926
Scottish Solicitors’ Discipline Tribunal expenses428392
Regulation expenses4837
Licensed providers337
NOTE 12 - Representation and professional support  
Employment costs (note 28)9961,076
Conveners' compensation (note 27)6653
Annual conference & In-House Lawyers’ Group events (note 17)53101
American and Canadian Bar Association1219
International Bar Association912
Council of Bars and Law Societies in Europe2133
Commonwealth Law269
Professional support running costs92130
Professional practice running costs6997
Diversity running costs1831
Law reform running costs6058
Rights of audience6739
Regulation liaison running costs-17
Brussels office running costs97109
NOTE 13 - Central services  
Employment costs (note 28)848799
Facilities running costs4165
Finance running costs4847
IT running costs230190
Business continuity costs47
Administration running costs223237
Building running costs538444
Audit fees (note 30)1718
Convener compensation55
Human resources:  
Advertising & recruitment1911
Staff training4738
Other including closed pension scheme fees204193
Overhead recovery from Scottish Solicitors’ Guarantee Fund & Scottish Legal Aid Board(71)(70)
NOTE 14 - Marketing, communication & other 
Employment costs (note 28)388375
Society stakeholder engagement98101
Communication and marketing running costs266320
NOTE 15 - Commercial 
Employment costs (note 28)173182
Journal running costs (note 17)308339
Publications running costs (note 17)526
Update events (note 17)233251
Business development running costs (note 17)79
The Law Society of Scotland Services Limited consultancy costs1433
 NOTE 16 - Financial compliance, interventions & judicial factories 
Employment costs (note 28)8921,012
Judicial factory costs15794
Convener compensation75


NOTE 17 - Analysis of income earning units of the Society  
a) The Journal  
Income (note 5)295328
Expenditure (note 15)(308)(339)
Deficit for period(13)(11)
b) Publications  
Income (note 5)116143
Expenditure (note 15)(5)(26)
Surplus for period111117
c) Update events  
Income - Update events (note 4)345317
- Sponsorship (note 4)5012
Expenditure - Update events (note 15)(233)(251)
Surplus/(deficit) for period16278
d) Annual conference & in-house lawyer events  
Income - delegate fees & sponsorship (note 4)5550 
Expenditure (note 12) (53)(101) 
Expenditure relating to prior year-10 
Surplus/(deficit) for period2(41)
e) Service Provider Scheme  
Income (note 5)2123
Expenditure (note 15)                  (7)(9)
Surplus/(deficit) for period1414
 f) Staff costs (173) (182)
 Overall (deficit)/surplus for period110(25)


NOTE 18 – Corporation tax

18.1 Corporation tax on operating activities

Current corporation tax charge4053
Adjustment for prior years-(1)
Surplus for the year before tax56116
 Corporation taxation at 20.4% (2014 – 21.8%) 11 26
Income not subject to corporation tax(2,065)(2,193)
Expenditure not allowable for corporation tax2,0952,222
Small companies relief(1)(2)
Adjustment for prior years-(1)


The majority of the Society’s income (and related expenditure) is not subject to corporation tax.

 18.2 Corporation tax on gain on disposal of heritable property479-


This represents the tax charge for the gain on disposal of Drumsheugh Gardens after deducting original cost/1982 valuation, indexation relief and deduction of direct costs.

NOTE 19 - Fixed assets

19.1 Tangible fixed assets

 Heritable propertyLeasehold improvementsOffice furniture & equipmentTotal
At 1 November 2014586-2,8863,472
At 31 October 2015-1,2883,3444,632
At 1 November 2014--2,4562,456
Charge for year--262262
On disposals----
At 31 October 2015--2,7182,718
Net book value 31 October 2015-1,2886261,914
Net book value 31 October 2014586-4301,016


19.2 Listed investments

At 1 November 2014218
At 31 October 20151,961


The market value at 31 October 2015 was £1,884,000 (2014 - £234,000). No permanent diminution in value is anticipated.


NOTE 20 - Debtors

Due after more than one year:
















Property sale – final instalment (payable February 2017)





Due within one year:

 Trade debtors





Other debtors





Property sale
















NOTE 21 - Creditors: amounts falling due within one year

Fees in advance                                                       
Trade creditors662507662507
Corporation tax5205352043
Other taxation and social security117-117-
Other creditors724255702253


NOTE 22 - Capital account

At beginning of year4,758
Add: surplus for the year3,191
Actuarial (loss) recognised in the pension scheme(219)
At 31 October 20157,730


NOTE 24 - Pension schemes 

24.1 Defined contribution pension scheme

The Society operates a group personal pension on behalf of certain employees. The pension cost charge for the year in respect of those employees represents contributions payable by the Society to the scheme and amounted to £395,000       (2014: £365,000). Contributions outstanding at 31 October 2015 amounted to £46,000, being contributions for the month of October 2015.

24.2 Defined benefit pension schemeThe company operates a defined benefit pension arrangement called the The Law Society of Scotland Staff Retirement Benefits Scheme. The following disclosures exclude any allowance for defined contribution schemes operated by the company.

The company expects to contribute £219,000 to the scheme during the year to 31 October 2016.

The principal assumptions used to calculate scheme liabilities include:

 31 October 201531 October 2014
Discount rate4.10% pa4.10% pa
Inflation assumption (RPI)3.50% pa3.40% pa
Inflation assumption (CPI)2.80% pa2.70% pa
Pension increases – CPI limited to 5%2.80% pa2.70% pa
Pension increases – CPI limited to 3%2.50% pa2.40% pa
Pension increases – CPI limited to 2.5%2.20% pa2.20% pa
Revaluation in deferment2.80% pa2.70% pa
Post retirement mortality assumption110% of S1PxA, projected with CMI 2012 – long-term rate of improvement 1.5% per annum110% of S1PxA, projected with CMI 2012 – long-term rate of improvement 1.5% per annum
Tax free cashMembers are assumed to convert 25% of their pension into cash at retirementMembers are assumed to convert 25% of their pension into cash at retirement


Under the adopted mortality tables, the future life expectancy at age 65 is as follows:

Life expectancy at age 6531 October 201531 October 2014
Male currently aged 4524.324.1
Female currently aged 4526.926.7
Male currently aged 6522.122.0
Female currently aged 6524.524.3
Long-term expected rate of return on the scheme’s assets net of expenses4.10%6.40% pa



The major categories of assets as a percentage of total assets are as follows:

Asset category31 October 2015
CashLess than 1%


The actual return on the scheme’s assets over the period to the review date was £308,000.

The assets do not include any investment in shares or property of the Society.

The expected return on assets is a weighted average of the assumed long-term returns for the various asset classes.  Equity and property returns are developed based on the selection of an appropriate risk premium above the risk free rate which is measured in accordance with the yield on government bonds. Bond returns are selected by reference to the yields on government and corporate debt as appropriate to the scheme’s holdings of these instruments.

Amounts recognised in the balance sheet at 31 October 2015

 Value at 31 October 2015Value at 31 October 2014
Fair value of assets£6,252,000£6,188,000
Present value of funded obligations(£6,132,000)(£5,788,000)
Surplus/(deficit) *£120,000£400,000
Balance sheet asset/(liability)£0£0


Amounts disclosed on the balance sheet are made up of:Value at 31 October 2015Value at 31 October 2014
 AssetsFair value of assetsAsset not recognised due to limit on recognisable surplus £6,252,000(£120,000)  £6,188,000(£400,000)
Present value of funded obligations
Present value of unfunded obligations
Unrecognised past service costs
Other liabilities


Net (asset)/liability£0£0


Amounts recognised in the statement of total recognised gains and losses over the year

 31 October 201531 October 2014
Actuarial gains and (losses)(£659,000)(£805,000)
Effect of limit on recognisable surplus£400,000£616,000
Total amount recognised in statement of total recognised gains and losses(£259,000)(£189,000)


Amounts recognised in the profit & loss account over the year

 31 October 201531 October 2014
Current service cost£0£0
Interest cost£228,000£243,000
Expected return on assets(£268,000)(£243,000)
(Gains)/losses on settlements or curtailments£0£0
Past service cost£0£0


Please note that due to part of the surplus being unrecoverable then under the requirements of FRS17, the expected return on assets has been reduced from £388,000 to £268,000 and there is an item of £400,000 in the STRGL which means that overall the disclosed surplus for the funded benefits is limited to £0.

The unadjusted amount of the expected return on assets is shown in the asset and liability reconciliation.

Reconciliation of assets and defined benefit obligation

The change in the assets over the period was:

 31 October 201531 October 2014
Fair value of assets at the beginning of the period£6,188,000£6,711,000
Expected return on assets£388,000£436,000
Company contributions£219,000£189,000
Contributions by scheme participants£0£0
Benefits paid(£463,000)(£980,000)
Change due to settlements or curtailments£0£0
Actuarial gain/(loss) on assets(£80,000)(£168,000)
Fair value of assets at the end of the period£6,252,000£6,188,000


 The change in the defined benefit obligation over the period was:

 31 October 201531 October 2014
Defined benefit obligation at the beginning of the period£5,788,000£5,888,000
Current service cost£0£0
Contributions by scheme participants£0£0
Past service cost£0£0
Interest cost£228,000£243,000
Benefits paid(£463,000)(£980,000)
Change due to settlements or curtailments£0£0
Actuarial (gain)/loss on defined benefit obligation£579,000£637,000
Defined benefit obligation at the end of the period£6,132,000£5,788,000


Sumary of prior year amounts

Period to31 October 201531 October 201431 October 201331 October 201231 October 2011
Present value of defined benefit obligation(£6,132,000)(£5,788,000)(£5,888,000)(£5,908,000)(£5,594,000)
Scheme assets£6,252,000£6,188,000£6,711,000£7,019,000£6,526,000
Experience gains and (losses) on scheme liabilities*(£54,000)(£204,000)(£738,000)£227,000£134,000
Changes in assumptions used to value scheme liabilities(£525,000)(£433,000)(£721,000)(£398,000)£852,000
Experience adjustments on scheme assets(£80,000)(£168,000)£827,000(£9,000)(£437,000)


*Does not include allowance for changes in assumptions 

NOTE 25 - Notes to the cash flow statement

25.1 Reconciliation of surplus to net cash inflow from operational activities

Surplus for the year56116
Interest and dividends receivable(140)(141)
Taxation charge4052
Operating (deficit)/surplus(44)27
Depreciation charges262220
Loss/(gain) on sale of fixed assets and investments11(14)
Costs associated with disposal of heritable property(49)-
Pension scheme - contributions(219)(189)
Change in debtors80(157)
Change in creditors4,098713
Net cash inflow from operating activities 4,139600


 25.2 Analysis of net funds

Cash in hand and at bank 2015 2014
Balance at start of year7,0096,688
Net cash inflow1,408321
Balance at end of year8,4177,009

NOTE 26 - Related party transactions

26.1 Scottish Solicitors’ Guarantee Fund

Members of the Scottish Solicitors’ Guarantee Fund Committee are also members of the Council of the Law Society of Scotland. At the year-end, a balance of £465,933 (2014 - £89,563) was due to the Scottish Solicitors’ Guarantee Fund, which included subscriptions received before the year-end for the 2015/16 subscription year. During the year, overheads of £70,529 were charged from the Law Society of Scotland to the Guarantee Fund (2014 - £70,327).26.2 Scottish Solicitors’ Benevolent Fund Three trustees of the Scottish Solicitors’ Benevolent Fund are also members of the Council of the Law Society of Scotland. Two trustees of the Scottish Solicitors’ Benevolent Fund are employees of the Law Society of Scotland. At the year-end, a balance of £6,619 (2014 - £29,476) was due to the Law Society of Scotland.26.3 The Law Society of Scotland Services Limited

The Society has a wholly owned subsidiary company which in turn holds a 20% shareholding in Legal Post (Scotland) Limited. The shares were acquired for negligible consideration. At the year-end, a balance of £1,014 was due to (2014 - £5,613 due from) the Law Society of Scotland. The Law Society of Scotland Services Limited post-tax profit for the year to 31 October 2015 was £36,334 (2014 - £41,204). During the year, the Society purchased services from Legal Post (Scotland) Limited amounting to £114,228 (2014 - £127,229).

26.4 Legal services

Some Council members are partners of firms instructed by the Law Society of Scotland to provide legal services to the Society. Firms of solicitors are appointed to the Society’s panel after a competitive tendering process. None of the office bearers’ firms provided any services to the Society in the year ended 31 October 2015.

26.5 LawCareDuring the year, the Society paid £21,150 (2014 - £15,300) to LawCare, a registered charity, for pastoral care services. An employee of the Society is a director of LawCare.26.6 Pritchard TrustDuring the year, the Society paid £10,225 (2014 - £10,000) to the Pritchard Educational Trust, a registered charity. The Society’s President and Vice President are trustees.

NOTE 27 - Committee conveners' allowances claimed  20152014


Legal aid


Property law


Professional conduct

Criminal law



Professional practice


Council of bars and law societies of Europe

Civil procedure

Law reform





























NOTE 28 - Employment costs by department  
Corporate office (note 9)432397
Membership (note 10) 721670
Regulation (note 11)705652
Representation (note 12)9961,076
Central services (note 13)848799
Marketing & communications (note 14)388375
Commercial (note 15)173182
Financial compliance, interventions & judicial factories (note 16)8921,012
The average number of full-time equivalent employees in the year was 119 (2014 - 120). NOTE 29 - Employment costs by item
Employer's national insurance441444
Employer's pension395365


NOTE 30 – Auditors’ remuneration  
Audit fees1716
Other accounting and tax services-1


Judicial factory work referred to fees set by the Accountant of Court.

NOTE 31 - Contingent liabilities

In appointments of external Judicial Factors, the Society has an obligation to meet any shortfall where the estate under administration is insufficient to meet the commission payable to the Judicial Factors as fixed by the Accountant of Court. In cases where a potential shortfall is identified, a provision representing the best available estimate of the liability is made within the accounts. However, the Society may also have a liability in other cases where a Judicial Factor has been appointed but it is not possible to quantify the liability at the balance sheet date. The existence of these liabilities depends on the funds collected by the Judicial Factor in the administration of the estate and the Society may receive a refund or have to make further payments.

NOTE 32 - Secured asset

In 2014, the Society assigned security over a specific bank account through a Scots law pledge to the trustees of the staff retirement benefits scheme. The sum secured is £1 million. The security becomes enforceable if the Society defaults on its annual repayment obligations, and remains effective until the next triennial valuation is agreed.

NOTE 33 - Provision

The Society entered into a contract for leasehold improvements for £1.04 million on 11 August 2015. At 31 October 2015, there remained £682,000 still to be billed, all of which has been capitalised under leasehold improvements.