John Sykes is an ordinary shareholder in Prosperous plc and has recently received the consolidated accounts of the Prosperous Group for the year ended 31 December 2017. He has been discussing the accounts with his accountants, Know Most & Co., and mentioned that he was not clear as to the amount of distributable reserves available for the payment of dividends.

Requirement

(a) Define profits available for distribution by a public company and the disclosure requirements for the company and the group.

(b) Explain the implications of the following items to profits available for distribution:

(i) Research and development activities;

(ii) Excess depreciation.