FRS 102 and Transitioning Accounts

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (the new UK GAAP) becomes mandatorily effective for accounting periods commencing on or after 1 January 2015 for entities who are not eligible, or choose not to apply the FRSSE or the micro-entities legislation in their financial statements (earlier adoption of the standard is permissible).  This Whitepaper focuses on some of the main practical transitional issues which practitioners and company accountants need to take into consideration when preparing to apply the new reporting regime for the first time and looks at:

  • Identifying the date of transition to FRS 102
  • Preparing the comparative information
  • Presentation and software issues
  • Filing requirements for Companies House and HMRC

Identifying the date of transition

Whilst FRS 102 does not come into mandatory effect until accounting periods commencing on or after 1 January 2015, financial information for earlier periods will have to be gathered because the rules must be applied retrospectively to the date of transition.

Preparing the comparative information

As explained earlier in this Whitepaper, the rules are retrospective and have to be applied from the date of transition.  For example, assuming a 31 December 2015 year-end, adjustments will have to be made as far back as the 2013 closing trial balance as the closing balance sheet on 31 December 2013 will form the opening balance sheet on 1 January 2014 (the date of transition) and an opening FRS 102 balance sheet must be prepared as at the date of transition.

Presentation and software issues

Software providers are in the process of amending accounts production software packages so that they are ready for FRS 102.  Whilst software packages will be able to deal with the transitional adjustments and associated disclosure requirements, it is important to emphasise that accountants will have to carry out much of the work in aligning accounting policies, dealing with the necessary transitional entries and ensuring correct disclosures are made within the financial statements themselves.

Accounting programs must be able to cope with changes in accounting methodologies, terminology and in some cases structures of statements (such as the Cash Flow Statement).

Filing requirements for Companies House and HMRC

Both Companies House and HMRC will not require prior year financial statements to be resubmitted, nor will HMRC require previous corporation tax returns to be amended as a result of the transition. This is because the transition to FRS 102 will be comprehensively disclosed in the notes to the financial statements to comply with the disclosure requirements in Section 35 Transition to this FRS.  When dealing with the transitional disclosures, it is probably worthwhile including as much disclosure as possible to explain the transitional adjustments (particularly where tax relief is being claimed) by cross-referencing the adjustment to an appropriate disclosure note.

For examples and more details, read the full whitepaper here.

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