By Kris Allen – Client Relationship Director
What is FRS 102?
FRS 102 is one consolidated standard which replaces all existing UK GAAP standards. It is a new standard applicable in the UK and Republic of Ireland.
In March we published an article exploring the implications of FRS 102. In this article we focus on the transition to FRS 102.
When is it applicable?
This new standard is mandatory for financial periods starting on or after 1 January 2015. Early application is permitted for accounting periods ending on or after 31 December 2012. This means that financial statements for the year ending 31 December 2015 need to be prepared in line with the new standard.
Who is affected by FRS 102?
All entities that currently prepare financial statements in accordance with UK GAAP will have to replace UK GAAP with either FRS 102 or another appropriate accounting framework, such as the International Financial Reporting Standards (IFRS). This includes all entities that prepare financial statements in accordance with the Limited Partnership Agreement (LPA GAAP) that currently reference some compliance with UK GAAP.
Those charged with governance, such as the Board of Directors, should take into consideration the available accounting frameworks and the potential impact they could each have on the respective entity, and then choose the framework they will adopt with this impact assessment in mind.
Will the current and comparative figures change in the financial statements?
Potentially. This is dependent on the current accounting policies adopted under UK GAAP, the financial statement line items included in the financial statements and how they are currently recognised and measured. The impact assessment that should be completed for each entity or group of similar entities should identify and quantify any significant differences between UK GAAP and FRS 102, including where these will impact the recognition and measurement of assets, liabilities, income and expenses.
An entity adopting FRS 102 for the first time for the year ending 31 December 2015 may need to restate comparatives and the net assets at the date of transition (i.e. 1 January 2014 for a 31 December 2015 year end).
Will the format of the financial statements change?
Yes. The format of the financial statements of all entities caught by FRS 102 will be affected to varying degrees:
- The format of the primary statements will change under FRS 102, however, there is an exemption whereby some formats may be retained provided that they are not misleading.
- A statement of cash flows will now need to be presented under FRS 102 where previously most entities were exempt from the preparation of a cash flow statement under UK GAAP due to the small companies exemption.
- Updated comparatives will need to be presented where required together with reconciliations of the prior year adjustments, where no transition exemptions exist.
- First time adoption explanatory notes on the transition to FRS 102 will also be required together with the full accounting policies adopted under FRS 102.
Useful web links