UK GAAP - A Year of Change | Accountex 2015
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Transcript of UK GAAP - A Year of Change | Accountex 2015
Sage 3
Agenda1. The need for change2. The new standards3. Financial statements under FRS 1024. Key differences5. First-time adoption of FRS 1026. Reduced disclosures7. Changes to company law8. Impact on financial reporting standards9. Practical considerations
Sage 4
An Overview of the New UK GAAPThe need for change
• Consistency with IFRS• Reflects more up to date thinking• More proportionate reporting• Cost effective
Why?
• Majority of large and medium-sized UK entities• Entities that don’t apply EU-adopted IFRS• Entities that don’t apply FRSSE
Who?
• Accounting periods beginning on or after 1 January 2015
• Early adoption permitted• Transition date
When?
Sage 5
An Overview of the New UK GAAPThe new standards
• Which standards to apply• Application of SORPs• Transitional arrangements
FRS 100
• Disclosure exemptions from EU-adopted IFRS for qualifying entitiesFRS 101
• Succinct financial reporting based on IFRS for SMEs• Replaces current FRSs, SSAPs and UITFs • Includes reduced disclosures for qualifying entities
FRS 102
• Insurance contractsFRS 103
Sage 6
An Overview of the New UK GAAPFinancial statements under FRS 102
• Statement of financial position• Statement of comprehensive income or income
statement• Statement of changes in equity• Statement of cash flows
Primary statements
• Accounting policy changes• Statement of compliance • Transition note
Notes to the accounts
Sage 7
An Overview of the New UK GAAPKey differences
• Comprehensive accounting guidance• Classified as ‘basic’ or ‘other’• Derivatives on-balance sheet
Financial instruments
• Current service cost and net interest cost recognised in P&L with remeasurements in other comprehensive income
Defined benefit pension plans
• Revaluation gains and losses taken to profit or loss rather than reservesInvestment property
• More intangibles likely to be recognised separately from goodwill• Finite useful lives for goodwill and intangibles• Merger accounting only permitted for group reconstructions
Business combinations
• Timing difference plus approach could result in larger deferred tax liabilitiesDeferred tax
Sage 8
An Overview of the New UK GAAPFirst-time adoption of FRS 102
• Establishing transition date• Preparing the transition balance sheet
− Retrospective application generally applies− Exceptions where retrospective application is
not permitted− Exemptions available
• Consideration of timescales
Sage 9
An Overview of the New UK GAAPReduced disclosures
• Exemptions for qualifying subsidiaries and ultimate parents
• Areas affected:− Cash flow statement− Financial instruments− Share-based payments− Related party transactions− Share capital
• Certain requirements if exemptions are taken
Sage 10
An Overview of the New UK GAAPChanges for small companies
Small companies
Company Law:Small companies
regime
Accounting Standards:
FRSSE
Sage 11
An Overview of the New UK GAAPChanges to company law
• What’s changed?• Size thresholds
• Filing requirements• Disclosure requirements• Amendments for micro-entities• What next?
Small Medium
Net turnover £10.2m (£6.5m) £36m (£25.9m)
Balance sheet total
£5.1m (£3.26m) £18m (£12.9m)
Employees 50 250
Sage 12
An Overview of the New UK GAAPImpact on financial reporting standards
• Continued consistency between revised legal frameworks and the financial reporting frameworksWhy?
• Draft FRS 105• Based on the recognition and measurement
requirements of FRS 102FRED 58
• FRSSE withdrawn• New section of FRS 102 for small entitiesFRED 59
• Draft amendments to FRS 100 and FRS 101FRED 60• Expected to be finalised in July 2015• Mandatory for accounting periods beginning on or after
1 January 2016What next?
Sage 13
An Overview of the New UK GAAPPractical considerations
Staff training Software systems
Cost of transition Client management