Resources Guides 08.12.16

FRS 102: What do you need to do?

The introduction of FRS 102 in 2016 sees the most significant change to UK financial reporting in recent years.

2016 may seem a long way off but for the majority of companies with a 30 May year end or earlier the transition date has already passed. This means you should be thinking about the implications of FRS 102 first, rather than current UK GAAP, for any transactions, particularly if it results in a change to the timing of tax payments or profits available for distribution via dividends.

What is FRS 102?

The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) is the new accounting standard that replaces existing FRSs, SSAPs and UITFs. It sets out the vast majority of the future shape of UK financial reporting.

Can I continue to apply current UK or Irish GAAP?

No, unless you are an eligible entity applying the FRSSE. For other entities, FRS 102 replaces all existing FRSs, SSAPs and UITFs for accounting periods beginning on or after 1 January 2015.

Are disclosure exemptions available?

Yes, FRS 102 includes disclosure exemptions under certain circumstances. They include exemption from disclosure of a cash flow statement and some financial instruments, related party and share-based payments disclosures.

The exemptions will only be available in single entity financial statements (including intermediate and ultimate parents). To qualify for the exemptions, the financial statements of the parent or subsidiary must be included in publicly available consolidated financial statements that give a true and fair view.

There are some administrative requirements (such as notifying and not receiving objections from shareholders) and the financial statements must disclose details of the exemptions taken.

What are the key accounting differences?

There is more use of fair value accounting (with movements generally recognised in profit or loss) and more choices of accounting policies under FRS 102 than current UK and Irish GAAP.

Specific areas where there are changes include accounting for derivatives, lease incentives, long term intercompany balances, goodwill, multi-employer group defined benefit pension schemes, investment properties and deferred tax. If you have any of these items, you should consider the potential impact on your accounts as soon as possible.

What is the tax impact?

Depending on the items in your financial statements, your accounting profit and therefore potentially your taxable profits may be different under the new regime.

There may be tax credits or charges arising on transition.

Tax elections may need to be made in advance and existing arrangements reconsidered.

What should I do now?

You need to understand how the changes and different options may affect your tax position, distributable reserves and any financial covenants.

Review your internal systems and training requirements.

Start planning for transition – even if you are not adopting early, you need a transitional balance sheet, which for entities with a 31 December year-end will be as at 31 December 2013.

Contact us to discuss how we can help you achieve a smooth transition to the new standards.

Can we help?

Yes. We have been helping clients deal with changes in legislation and challenges to their business for many years. Although the changes may appear daunting, with careful planning and organisation FRS 102 transition need not be a headache.

Here at CBW we can help identify what changes will affect your business and help you plan for them. We are very happy to start by just having an informal chat. From there we can provide suggestions on how best we can provide support for your particular circumstances.


Contact us

If you would like a free initial meeting to explore the impact of FRS 102 on your business, please contact your usual CBW partner or contact us.