5 main areas of difference are set out below. FRS 102 differs from Old UK GAAP in respect of UEL. The primary changes from the original paper are: There currently exists a suite of accounting standards in the UK. However, consideration should be given to the facts which led to the transaction price differing from fair value. Investment property to be shown separately. This ensures that there is continuity of treatment. Are required to give a true and fair view; Must contain a balance sheet, a profit and loss account and notes to the financial statements (and are encouraged to contain a statement of total comprehensive income and a statement of changes in equity, or a statement of income and retained earnings, where necessary to give a true and fair view). An internationally recognised designation and professional status from ICAEW. For further guidance on the transitional provisions applying to financial instruments see Part B of this paper. FRS 102 also requires that a statement of changes in equity is presented which captures an entitys profit or loss for a reporting period, other comprehensive income for the period, the effects of changes in accounting policies and corrections of material errors recognised in the period, and the amounts of investments by, and dividends and other distributions to, equity investors during the period. As such, the Regulations are applicable to transitions to FRS 101 and FRS 102 in the same way as they applied to transitions to IAS or FRS 26. Although not required under Company Law, Section 1A encourages certain disclosures in order for the financial statements to show a true and fair view including: For further detail and analysis on Section 1A see our link to our FRS 102 Section 1A quick guide. For companies which have adopted FRS 23 (and FRS 26) the transition to FRS 102 and Section 30 isnt expected to result in any significant changes. It remains the responsibility of the entity or individual to ensure that it prepares accounts in accordance with relevant GAAP and submits a self assessment in line with UK tax law. Companies that will be applying fair value accounting for the first time in a period of account commencing on or after 1 January 2015 will need to decide whether to elect-in to regulations 7, 8 and 9. Transitional adjustments may arise where the debt was not previously retranslated at the year end, although the amendment to the Disregard Regulations may also apply to this transitional amount. FRS 102 contains comparable requirements in Section 22, Liabilities and Equity. If shares have been reclassified during the period does this need to be disclosed in the notes. Companies will be able to prepare Section 1A consolidated financial statements for a small group. Debt may be restructured or have its terms modified such that, in accordance with FRS 5 and Old UK GAAP (where FRS 26 isnt adopted), no gain or loss would be recognised in the accounts. The effect of this regulation is to disregard for tax purposes the amounts recognised in the statement of equity (as items of other comprehensive income) until they are recycled to the income statement. There are, however, certain exceptions where the tax statute specifies a particular accounting treatment. For companies that apply SSAP 20 its possible for permanent as equity loans to be treated as non-monetary items and be carried at historic rates on the balance sheet rather than be retranslated as at each period end. This is available at: Corporation Tax: Disregard Regulations for derivative contracts. Talking of disclosures, why did you post this anonymously? Related party transactions (Sch 3A(55))-Note disclosures less than what is required currently. (a) A person or a close member of that person's family is related to a reporting entity if that person: (i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. However, no exclusions apply where the derecognition occurs after the accounting transition date for example, after the start of the prior period comparatives. ; and, the exemption in Section 35.10(u) not to apply the fair value requirements of Section 11 and 12 until the start of the current year (i.e. amount in total included in creditors where security is held, capitalisation and selecting useful life (Sch 3A(24)(25)), transactions as per S.305-S.309 CA 2014; and. First accounts case with EMI share options and considering whether the EMI share options should be recognised in FRS102 s1A accounts. There is no equivalent in Section 30 of FRS 102 for the cover method of hedging non-monetary assets. This ensures that there is continuity of treatment the amounts will subsequently be brought into account under the Disregard Regulations in priority to the COAP Regulations. Other transactions entered into in which director has a material interest (Section 309 CA 2014). Its optional for all other entities, and they can take advantage of the option to use fair value accounting that is part of UK company law. The loan relationship would normally be taxed in line with the accounts. Because the SORP has the force of law, this overrides the exemptions in 1A and therefore all charities preparing SORP compliant accruals accounts must comply in full with the disclosure requirements of FRS 102 as applicable to large by Des O'Neill | Feb 23, 2017 | FRS102.com Blog. Given that many UK companies will be adopting FRS 102 for the first time in 2015, the paper has not been updated for these changes. Previously, companies had the ability to elect out from the Regulations. This quick guide is split out in the following way: , FRS 102 Summary Section 2 Concepts and Pervasive Principles, FRS 102 Summary Section 3 Financial Statement Presentation, FRS 102 Summary Section 4 Statement of Financial Position, loans to and from related parties at non-market rates and not repayable on demand; and. Does the above sound correct or should the fair value be recognised over a default period, such as, 10 years and reversed at a later date if the options become void? Under FRS 102 its required to measure the loan at fair value. Called up share capital 8 50,000 50,000 Profit and loss reserves 1,460,375 1,155,964 . The relevant legislation is in CTA 2009 at Part 8, Chapter 15. What remains the same where an entity previously applied FRSSE or full FRS 102? business review not required. Accounts prepared in accordance with Old UK GAAP are required to present, amongst other things, a profit and loss account (P&L), balance sheet and where applicable a statement of total recognised gains and losses (STRGL). Accounting for share based payments under Old UK GAAP (FRS 20) and FRS 102 (Section 26) are aligned with few differences. Triennial Review 2017 There is now an option to early adopt the amendments to FRS 102 Section 1A contained in the Triennial Review 2017. Where this happens, the COAP Regulations (reg 3C(2)(d)) disregards any loan relationship adjustment as well. Movement on profit and loss reserves including transfers in and out to be disclosed if not shown on face of profit and loss account or in SOCE. FRS 26 is aligned to IAS 39 and is mandatory for companies with listed debt or equity that arent using IAS. Typically the derivative contract will be required to be recognised separately and measured at fair value. The accounting treatment of investment properties doesnt determine, for tax purposes, whether the property is held as an investment property (giving a capital receipt on disposal) or whether its part of a trading transaction (and so is on revenue account and forms part of the companys trading profits). details of interests in shares which give more than a 20% interest in a class of shares (or the profit/loss or net assets for the entity in which the shares are held); increased number of accounting policies and expansion of wording on existing policies (if transitioning from a previous GAAP for the first time); for assets held at fair value requirement to disclose fair value movements recognised in the profit and loss; details of the valuation methodology adopted for derivatives recognised on the balance sheet. where consolidated accounts can be obtained from if applicable. Disclose the amount of interest income recognised on loans to group companies in the P&L, Disclose the amount of interest expense recognised on loans from group companies in the, Disclosures for credit institutions & specific disclosures (Section 310 -313 CA 2014), Disclosure of average number of employees in year (Section 317(1)(a) CA 2014). Different wording for certain items. Chapter 15 also contains different rules to deal with a change of policy involving disaggregation or where the asset is subject to a fixed-rate writing down election under section 730. That approach will continue to apply for prior period adjustments arising in accordance with Section 10 of FRS 102. In contrast, FRS 102 requires that, where the modification or restructuring to the debt is considered substantial, the original debt instrument will be derecognised and the new debt instrument recognised at its fair value. The options expire 10 years from the date they were granted and termination of employment. (4) Currency, commodity and debt contracts in a hedging relationship (Regs 7 or 8 contracts). A fixed asset is accounted for under Section 17 when the asset is held for use in the production or supply of goods or services; for rental to others; or for administrative purposes and is expected to be used for more than one accounting period. See section 878 CTA 2009. For Corporation Tax purposes, adjustments are treated as receipts or deductions in computing the trade profits. For example for entities preparing their accounts at 31 December 2015 the transition date will be 1 January 2014. Reduced related party transaction disclosures. In all cases the issuer will be required to account for the debt and the equity components separately (see CFM21260). However, bifurcation isnt typically permitted under Old UK GAAP (where FRS 26 isnt applied) or under Sections 11 / 12 of FRS 102 (although in both cases the issuer of compound instruments will still separate out the equity component in accordance with FRS 25 or Section 22 respectively). With the introduction of IAS in 2004 / 2005, a number of changes were made to the tax legislation to deal with certain issues that arose for companies that transitioned to IAS in their entity accounts. You have accepted additional cookies. No taxable credit or allowable debit is to be brought into account under Chapter 15 to the extent that its already brought into account by section 723 (revaluations), section 725 (reversal of accounting loss) or section 732 (reversal of accounting gain). For companies that transition from Old UK GAAP to FRS 101 a separate paper providing an overview of the key accounting and tax considerations is available. We've had enough FRSSEs over the years to have nailed this point one way or the other if there was any real concern about this disclosure/non-disclosure. Members may also wish to refer to the following related guidance and helpsheet: FRS 102 Section 1A details the presentation and disclosure requirements that are specific to small entities choosing to apply the small entities regime (see FRS 102 summary and timelinefor further details regarding an entities eligibility to apply section 1A). There may be differences in the timing of income recognition under the 2 bases. Tax would typically follow the accounting in this case. UK tax law isnt entirely consistent with SSAP 21 (see Statement of Practice 3/91). As noted above FRS 102 also permits a user to make the policy decision to apply the recognition and measurement criteria of IAS 39. While the references and titles used in FRS 102 are aligned to those used in IAS the tax statute has been updated to cover both sets of terminology. In addition Section 22 requires that equity instruments are recognised on issue at the fair value of the cash or other resources received. However, section 322 CTA 2009 will typically exempt gains arising where a debt is released in consideration of ordinary shares. Firstly FRS 102 doesnt permit an indefinite life. The new legislation will usher in the most comprehensive overhaul of Irish company law in over 50 years and we will provide you with a detailed synopsis of the highlights and notable changes that are to be introduced. ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. Appendix C of FRS 102 (March 2018) sets out the mandatory minimum disclosure requirements for small entities in the UK (see below for further details). Section 1A only provides disclosure exemptions. This isnt permitted under IAS, FRS 101 or FRS 102 which all require the foreign currency amount to be translated using the spot exchange rate. Its possible for companies incorporated outside of the UK to be resident in the UK. For further guidance on the transitional provisions applying to financial instruments see Part B of this paper. Section 1A provides for certain modifications to the full requirements for small companies, and in particular provides reduced disclosure and presentation requirements. In addition, in December 2014 the Disregard Regulations were extended so to exclude exchange movements on certain instruments that were previously accounted for as permanent as equity debt under SSAP20. Companies will be able to prepare Section 1A consolidated financial statements for a small group. See CFM35190 for further details of the rules for taxing loan between connected companies. In contrast to basic financial instruments other financial instruments are typically recognised and subsequently measured at fair value in the P&L. However, in contrast to SSAP 20, FRS 102 also specifically requires consideration of the influence of the parent on the companys operations and activities. This paper doesnt cover those financial instruments that fall outside of these categories for example, equity instruments in the form of shares and guarantees. Section 10 of FRS 102 requires that a change in accounting policy resulting from a change in the requirements of an FRS or FRS abstract is accounted for in line with the requirements of that revised FRS or FRC abstract. In addition UITF 29 provides that, where certain criteria are met, website development costs are recognised as part of tangible fixed assets. In effect, the tax treatment of such contracts under Old UK GAAP continues where regulation 9 of the Disregard Regulations applies. Instead the depreciation is adjusted prospectively to reflect the revised useful economic life. Small Company (FRS 102 1A) . Second, capitalised expenditure in respect of an intangible asset will be relieved under the rules in Part 8 CTA 2009 as its written down in the accounts (subject to the normal exclusions, including the pre-FA 2002 rule). Discover the Accounting Excellence Awards, Explore our AccountingWEB Live Shows and Episodes, Sign up to watch the Accounting Excellence Talks. Under Old UK GAAP it measures the loan on a historic cost basis. Examples of common financial instruments include; cash, trade debtors, trade creditors, bonds, debt instruments and derivatives. ` N _rels/.rels ( J1miz0$IHFmAT\XkIf'q`aY`8Zx=.i-Z?@MS1J B'xRA_1$z-&rjWu}7 lK0S~;~u 3#pZd-=JmV),I]HYsk?BBp+QJF8 PK ! This chapter of the paper concentrates on those companies which dont currently apply FRS 26 as its likely that these companies will see the biggest change. Directors are still required to consider if additional disclosures are required in order to show a true and fair view (Section 289 CA 2014). Note that its not envisaged that s.53 FA11 will apply to entities on transition to Section 20 of FRS 102 by virtue of subsection 3 of s.53 FA11. What constitutes cost will depend on the particular facts in question. For those that choose to apply the Section 11 /12 option certain elements wont change but the basic/other distinction has the potential to result in significant changes. I suspect I would consider all these notes necessary to give a true and fair view irrespective of any specific stipulations within FRS102 (which after a quick read through section one I failed to find), so section IA.5 would guide me irrrespective of whether required or otherwise. Its aimed at the opening adjustments to the cashflow hedge element of shareholders equity reserves. The Disregard Regulations (regs 7(1) and 8(1)) provide that no transitional adjustments arising on such contracts are to be brought into account these amounts are disregarded. In relation to its first financial year; orA company qualifies for the small companys regime if it fulfils at least two of the three qualifying conditions listed below: Note 1: Exception even where the above thresholds are met: S. 0A(4) and 280B(5) of CA 2014 excludes the following companies from applying the SCR and hence Section 1A: Companies will continue to apply all the measurement and recognition criteria under FRS 102 Sections 2 to 35 of FRS 102. Companies will be able to prepare consolidated financial statements in line with Section 1A, the small companys regime and Schedule 3A and 4A of Companies Act 2014. This publication is available at https://www.gov.uk/government/publications/accounting-standards-the-uk-tax-implications-of-new-uk-gaap/frs-102-overview-paper-new. This might arise in respect of a standalone loan investment, or it may arise where the company has applied the cover method in respect of borrowings or a currency contract matching the loan investment. The fact that the ICAEW disagree is too bad. These specific issues are explained below, but are intended to ensure that the correct amounts are brought into account overall for loan relationships and derivative contracts. Section 1A was significantly amended as part of the For companies not applying FRS 26 there is no specific, comprehensive standard for financial instruments in Old UK GAAP. Amounts on such contracts are brought into account under regulation 10. It is most likely to be applied by small, medium-sized and large private companies. FRS 102. The Institute of Chartered Accountants in England and Wales, incorporated by Royal Charter RC000246 with registered office at Chartered Accountants Hall, Moorgate Place, London EC2R 6EA.