FRS 102 Update

Presented by John Selwood

Disclosures – interesting view

•Business review

•It is with great regret that the Directors have been forced

to adopt FRS 102. The accounts are now even more

unintelligible to the Directors and Shareholders than before

and the directors consider that the new standards serve no

useful purpose to the shareholders other then to increase

the costs of preparation and audit.

Highlights

Amendments to FRS 102

Feedback on FRS 102 implementation

FRS 102 Section 1A

FRS 102 1A – practical issues

Deemed cost exemtions - refresher

Amendments proposed to FRS 102

Improve-ments

IFRS for SMEs

IFRSs New,

improved FRS 102

Triennial review

Improve-ments

IFRS for SMEs

IFRSs New,

improved FRS 102

Triennial review

Phase 1 – FRED 67 – Mar 2017 Phase 2 – Sep 2017

• Exemption for small entities when measuring loans from a director who is also a shareholder

Directors’ loans

• Fewer intangible assets will be required to be recognised and valued separately from goodwill

Intangible assets acquired in a

business combination

• Entities will be able to measure such properties at cost less depreciation & impairment instead of fair value

Investment property rented to another

group entity

• PC 1 January 2019

• Early adoption permitted Applies

Highlights - principal amendments proposed

Changes to the IFRS for SMEs

• Proposals reflect

some but not all of

the amendments to

the IFRS for SMEs

made in 2015

• Undue cost or effort

exemptions

• To be removed for

investment

properties!

SSAP 19 & FRSSE

Where the tenant is a

group company the property is a fixed asset

FRS 102

No similar exclusion.

Therefore, it is an

investment property

Change for investment properties in a group

H Ltd

• Owns property

S Ltd

• Tenant

Loan from director

shareholder (+close family)

SMALL company

• Capital contribution

• Amortised Cost etc

Financing transactions – limited scope

exemption

Separately recognised intangible assets – now

an accounting policy choice

Goodwill

Licence

Customer list

Domain name

Goodwill

Software

Database

Old

UK

GA

AP

FR

S 1

02

at

FA

IR V

AL

UE

Basic Non-basic

Financial instruments – more principles based

• New definition of financial institution

• Cashflows– reconciliation of net debt

• Revenue IFRS 15

• KMP compensation

• Minor 1A changes

• FRS 105 changes – s396, new notes – employee nos and off balance sheet arrangements

FRED 67

More detailed changes

• Exemption for small entities when measuring loans from a director who is also a shareholder

Directors’ loans

• Fewer intangible assets will be required to be recognised and valued separately from goodwill

Intangible assets acquired in a

business combination

• Entities will be able to measure such properties at cost less depreciation & impairment instead of fair value

Investment property rented to another

group entity

• PC 1 January 2019

• Early adoption permitted Applies

Highlights - principal amendments proposed

Feedback on FRS 102 Implementation

Software?

Accounting policy note

Judgments and uncertainty

• Measured at fair value through profit or loss

• That are debt instruments measured at amortised cost (including undiscounted items eg, trade receivables, accrued income but not prepayments)

• That are equity instruments measured at cost less impairment

Financial assets

• Measured at fair value through profit or loss, showing separately those that are not derivatives or held as part of a trading portfolio

• Measured at amortised cost (including undiscounted items eg, trade payables and accruals)

• Loan commitments measured at cost less impairment.

Financial Liabilities

FRS 102 – new notes – financial instruments

• In aggregate

• In addition to any directors remuneration disclosure

KMP Compensation

• Not the SSAP 21 basis!

• TOTAL minimum lease obligations - banded

Operating leases

FRS 102 – changed notes

Transitional adjustments

Narrative disclosure needed

Errors are not transitional items!

HMRC has complained about lack of disclosures

FRS 102: Section 1A Small Entities

Recognition and

measurement

No exemptions for small

companies

Presentation and disclosure

Many exemptions in

Section 1A

FRS 102 for small companies

What is true and fair view?

FRSSE Plus around 20 extra disclosure over the requirements of FRS 102

FRS 102 1A plus

OCI, SOCIE or SOIRE

Encouraged disclosures

FRS 102 1A No more than is required

by the standard or CA2006

FRS 102 1A – Complete financial statements

• balance sheet (statement of financial position)

• profit and loss account (income statement)

• notes to the financial statements

Required

• OCI and SOCIE

• OCI could be combined with income statement

• SOIRE instead?

• Not cashflow!

Encouraged presentation

Statement of Income and Retained Earnings

• The statement of income and retained earnings is presented where the only changes in both the current and prior periods arise from:

• profit or loss

• dividends

• prior period adjustments due to changes in accounting policies and

• prior period adjustments due to the correction of material errors

SoIRE

What is true and fair view?

Abridged accounts P&L starts with gross

profit

Balance sheet only contains alphabetic and roman numeral headings, not arabic

FRS 102 1A – Notes

•Exceptional items

•Average number of employees

Interesting notes

FRS 102 1A – Other disclosures

• The part of the UK in which the company is registered

• The registered number

• Public or private company

• Limited by shares or by guarantee.

• The address of the registered office.

• Where appropriate, the fact that the entity is being wound up.

• Where the small entity has prepared abridged financial statements (and hence has combined items which have been assigned Arabic numbers in the statutory formats), if any items combined are material, disclose the individual amounts of any such items in the notes to the accounts.

• Any non-adjusting post-balance sheet events.

S396 etc

Practical issue 1: FRS 102 1A and the disclosure requirements

What is true and fair view?

FRSSE Plus around 20 extra disclosure over the requirements of FRS 102

FRS 102 1A plus

OCI, SOCIE or SOIRE

Encouraged disclosures

FRS 102 1A No more than is required

by the standard or CA2006

• A statement of compliance*

• Information about dividends*

• A going concern justification*

• Turnover note

• Operating profit note

• Interest payable note

• Taxation note

• Information concerning the net

book value of assets held under

finance leases

• The amount recoverable on

contracts that is included within

debtors

• Factored debts

• Any finance lease obligations

included within creditors

• Provisions note

• Share capital note

• Reserves note

• Separate disclosure of annual

commitments under non-

cancellable operating leases

• Separate disclosure of capital

commitments

• Separate disclosure of contingent

liabilities

• The name of the controlling party

• Transactions with a director’s

close family

• Transactions with a company

owned by a director

In FRSSE accounts

Practical issue 2: Filing requirements under revised CA2006

S444 – Filleted accounts for small companies

• Directors’ report

• P&L

• P&L notes

• Audit report

Do not file

• Balance sheet – with statement that no P&L is filed

• All other notes File

S444 – FAQs – FRF guidance

Do you file OCI, SOCIE or SOIRE?

•No

Do you file the employee

numbers note?

•Yes

S444 – FAQs – FRF guidance

10.Do the directors need to approve the ‘filleted’ accounts before the accounts are filed?

• Not legally

• But, probably Yes – it would be a good idea

• Update engagement letter?

S444 – FAQs – FRF guidance

11.Do I need to include the audit report in the ‘filleted’ accounts

at Companies House?

• No, but disclosure is needed

• Name of auditor, is the report qualified, if it….

• Extra note, extra page?

S444 – FAQs – FRF guidance

Abridged accounts

•File what you prepare for the members

•Annual consent – after y/e

FRS 102 Practical Consideration: Property plant and equipment

Section 17 Property, Plant and Equipment

Deemed cost

Revaluation Fair value

Two different transition exemptions!

• (i) item of property, plant and equipment;

• (ii) investment property; or

• (iii) intangible asset which meets the recognition criteria and the criteria for revaluation in Section 18 at, or before, the date of transition to this FRS as its deemed cost at the revaluation date.

a first-time adopter of FRS 102 may elect to use a previous GAAP

revaluation of an:

• (i) item of property, plant and equipment;

• (ii) investment property; or

• (iii) intangible asset which meets the recognition criteria and the criteria for revaluation in Section 18 at, or before, the date of transition to this FRS as its deemed cost at the revaluation date.

a first-time

adopter of FRS

102 may elect to use fair value of

an: