Make sure that you are ready for the new UK GAAP and understand the choices available to businesses.
2015 is the year that the old financial standards and guidance from the Financial Reporting Council are replaced by new UK GAAP. Accounts for periods beginning on or after 1 January 2015 must be prepared using the new Standards and the current FRSs, SSAPs, UITF Abstracts and Statements of Principles for Financial Reporting, together with FRSSE 2008, will cease to be valid.
Entities are permitted to use whichever of the new standards is most appropriate to them, subject to their eligibility to adopt them. FRSSE 2008 is replaced by FRSSE 2015 or later in the year a small company version of FRS102.
FRS 100 Application of Financial Reporting Requirements introduces the relevant financial reporting standards. It also establishes that if an entity is not required by legislation or regulation to prepare its accounts under EU IFRS, then the financial statements:
The UK Financial Reporting Framework offers the following options:
A qualifying group entity will also be able to prepare its individual financial statements in accordance with FRS 101 (EU IFRS with reduced disclosures).
Entities required by legislation or by the IAS or other Regulation to prepare their financial statements in accordance with EU IFRS, for instance group accounts of entities whose securities are listed on an EU stock exchange, will continue to do so.
The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 has an impact on the choice. The most significant provisions of the draft regulations will:
It allows directors to take advantage of the small company provisions by allowing adoption of the increased small company thresholds (turnover £10.2m, balance sheet total £5.1m and number of employees 50) and accounting requirements from January 2015 rather than waiting for the thresholds to apply for financial years beginning on or after 1 January 2016.
LLPs, partnerships and charities cannot be micro-entities. The Companies Act 2006 defines micro-entities as companies which do not exceed two or more of the following criteria in any year.
Micro-entities may prepare accounts that include only an abridged balance sheet, prepared according to one of two formats in FRSSE 2015, an abridged profit and loss account, for which there is only one format and a director’s report. It is not necessary to prepare a separate set of notes for micro-entities and the only additional information required, ie advances and guarantees to directors and other financial commitments and guarantees, must be included at the foot of the abridged balance sheet. Micro-entities can file just the abridged balance sheet and footnotes with Companies House.
The recognition and measurement criteria for micro-entity accounts are the same as those for FRSSE 2015, except for those applying to fixed assets and some current assets. The revaluation of tangible assets and the choice to measure fixed asset investments at market value are not available. Investment properties are accounted for at impaired historic cost rather than at market value at the balance sheet date and current asset investments cannot be measured at current cost.
More detailed guidance on micro-entities is available in the related links aside.
An entity eligible to apply the micro-entities provisions should consider whether micro-entity accounts would provide sufficient information to users of its accounts. This may be relevant where finance providers require more detailed accounts, or the option of revaluing fixed assets may be important. The FRC is proposing to make the accounting standards for micro and small entities consistent with FRS 102.
In this case, FRSSE 2015 would be withdrawn for accounting periods beginning on or after 1 January 2016 and the current provisions for micro-entities replaced by a new standard, the Financial Reporting Standard for Micro-entities (FRSME) based on simplified recognition and measurement requirements of FRS 102.
Under the proposed FRSME the presentation and disclosure requirements for micro-entities may not change, the recognition and measurement will change from those of FRSSE 2015 to those of FRS102. The FRS 102 requirements for micro-entities will be simplified under FRSME; accounting for individual transactions will be broadly consistent with larger entities, which should help users to understand the financial statements.
Small entities are able to apply FRSSE 2015 and those choosing to do so, need to be aware of the differences from FRSSE 2008. Further guidance on this may be found in the related links aside.
ACCA has published individual model accounts for a company using FRSSE 2015 which can be requested by e-mailing email@example.com and quoting your membership number.
Large and medium-sized entities
Many medium-sized entities may take advantage of The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015and use the small company regime ahead of 1 January 2016 and use FRSSE or yet to be issued small entity provisions in FRS 102.
Entities that are not small can adopt FRS 102, EU IFRS or FRS 101, if eligible.
The transition from old UK GAAP to FRS 102 is complicated and ACCA has published Technical Factsheet 181 FRS 102 – Making the transition to new UK GAAP, which includes an analysis of the changes to terminology amd formats from old UK GAAP, a detailed comparison of topical areas and the potential tax impact. This can be accessed via the related links aside.
ACCA has produced model accounts for a small company applying FRS 102. Members can request a copy by emailing firstname.lastname@example.org and quoting their membership number