FRS102 - The New Accounting Standard for UK Businesses and the Reporting Requirements for HR
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Transcript of FRS102 - The New Accounting Standard for UK Businesses and the Reporting Requirements for HR
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Presentations by Antony Federer FCCA, ACA, CF
Audit Partner at Rayner Essex LLPAnd
David Richter, Marketing Manager from Octopus
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The New Accounting Standard for UK Businesses and
The Reporting Requirements forHR Departments
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Outline of FRS 102 and Employee Benefits• Changes in accounting regulations in the
UK• What is FRS 102• How does it impact your company• Specific provisions that impact HR
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Changes in accounting standards• Accounts in the UK are prepared under accounting standards
called UK GAAP• GAAP stands for Generally Accepted Accounting Practice• Changes for accounting periods commencing on or after
- 1st January 2015 for medium and large companies- 1st January 2016 for small companies
• FRS 102 is applicable to medium and large companies from 1st January 2015 and small companies from 1st January 2016
• This will replace all existing accounting standards
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Company size criteria
Turnover Gross Assets
Average no. of employees
Micro-entity Not more than£632,000
Not more than£316,000
Not more than10
Small company
Not more than£10.2 million
Not more than
£5.1 million
Not more than
50
Medium company Not more than£36 million
Not more than£18 million
Not more than250
Satisfy Two out of the Three criteria to qualify
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Which accounting standards?FRS 101
FRS 102
FRS 102 – reduced disclosure
FRS 105 – Micro Entities
Certain large companies
Groups adopting IFRS
Large and medium companies
Small companies
Micro companies
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What is FRS 102 Prescribes how accounts are prepared
Shows what accounts disclosures are required
Single standard with 35 sections
335 pages!!!
FRS 102
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Sections most relevant to HR
• Section 28 – Employee benefits
• Section 35 – Transition to FRS 102
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Section 28 – Employee benefits
Definition:
All forms of consideration given by an entity in exchange for services rendered by employees, including Directors and Management.
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Section 28 – Employee benefits
There are 4 type of employee benefit:• Short term employee benefits• Post employment benefits• Other long term employee benefits• Termination benefits
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Section 28 – Employee benefitsShort term employee benefits“Employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the reporting period in which the employees render the related services”a) Wages, salaries and social security contributions;b) Paid annual leave and paid sick leave;c) Profit-sharing and bonuses; andd) Non-monetary benefits (such as medical care, housing,
cars for current employees)
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Section 28 – Employee benefitsShort term employee benefits
• You will need to calculate the unused / accrued holiday and any sick pay that has not been paid for all staff at the year end date to provide to your Finance Department
• Two questions to think about:1) Is the year end of your company coterminous with
the company’s holiday year?2) Are employees able to carry forward unused holiday
not taken during the holiday year?
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Section 28 – Employee benefitsShort term employee benefits
• If you answered “Yes” to question 1 (coterminous year end) then there may be little for you to do!!!!
If employees cannot carry forward any unused holiday then there is nothing to calculate and nothing to report
If employees can carry forward unused holiday pay then you will need to calculate the value of this and provide it to your Finance department
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Section 28 – Employee benefitsShort term employee benefits
• If you answered “No” to question 1:
You will need to calculate the value of any unused holiday at the year end date and provide it to your Finance department
Please note - If an employee has taken too much holiday the negative figure should be off set against the unused calculation
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Section 28 – Employee benefitsPost employment benefits
“Employee benefits (other than termination benefits and short term employee benefits) that are payable after the completion of employment”
= retirement benefits, such as pensions; and
= post-employment life insurance / medical care
This is a complex area and therefore if you believe you have any of these please liaise with your Finance Department so that they can seek advice accordingly
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Section 28 – Employee benefitsOther long term employee benefits
“All employee benefits, other than short-term employee benefits, post-termination benefits and termination benefits, if not expected to be settled wholly before 12 months after the end of the year end in which the employees render the related service”
= long-term paid absence (ie long-service or sabbatical leave)= long-term disability benefits= profit-sharing and bonuses= deferred remunerationYou will need to inform your Finance Department of any staff member falling into any of the above categories
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Section 28 – Employee benefitsTermination benefits
“Employee benefits provided in exchange for termination of an employee’s employment as a result of either:
a) An entity’s decision to terminate an employee’s employment before the normal retirement date; or
b) An employee’s decision to accept voluntary redundancy in exchange for those benefits.”
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Section 28 – Employee benefitsTermination benefits• If termination takes place during the accounting year with
payment after the year end date – then this information will need to be provided to the Finance department
A company may be committed to make payments to employees when it terminates their employment:
- by legislation, contractual agreements, or other agreements
Recognition – immediately as there is no future economic benefit to the company
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Section 35 – Transition to FRS 102What you will need to know to assist your Finance Team
• the year end of your company
• the first year in which the company will adopt FRS 102
• the transition date(being the first day of the year preceding the year of adoption i.e. if the year end is 31 Dec 15 the transition date is 1st January 2014)
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Section 35 – Transition to FRS 102What you will need to DO to assist your Finance Team
• Calculate the holiday pay provision:
- at the date of transition- at the end of the comparative year- at the end of the year being reported on
• Calculate any termination payments to be paid after the year end date
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Section 35 – Transition to FRS 102
Examples of dates
- the date of transition
- at the end of the comparative year
- at the end of the year being reported on
Year ended 31 December 2015
1 January 2014
31 December 2015
31 December 2014
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And Finally - Other reporting requirements
Average number of employees
For small companies – total only (this is new!)
For medium and large companies – split between each category (ie management, administration, manufacturing etc)
The calculation is the average number of all employees – irrespective if they are part time (every head counts as 1)
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Summary• This has been a brief introduction to the impact
of FRS102 on the HR Department• The major change for most companies will be
the requirement to make holiday pay accruals• The accurate quantification and gathering of this
data will be time consuming• Octopus Software can assist with this process
and David will now demonstrate how this can be done