You might be forgiven if you hardly noticed the publishing of FRS 102, the new Financial Reporting Standard for entities that are not listed. It’s only 350 pages long – if that sounds too long, keep in mind that it replaces the 3,000 page GAAP.
FRS 102 compliance comes into force for all accounting periods that start on or after 1st January 2015.
The changes are generally welcome particularly by standard setters wanting an international accounting framework, although not every change is going to be accepted with open arms.
The change that is likely to be the most annoying is a new requirement for short-term employee benefits to be accrued in the accounts. This requirement covers such things as wages and salaries, paid holiday leave and paid sick leave, profit sharing and bonuses, that are payable within 12 months after the reporting period when the employee gave their service.
Cash Flow Statements
There will also be major changes required to your Cash Flow Statement as the current nine headings will reduce to just three: Operating activities, Financing activities and Investing activities, which means a lot of rejigging of expenditure from the current headings into these three areas.
Accounting for Assets
Some other areas of notable change are:
- You will be able to choose to capitalise borrowing costs for self-constructed assets.
- There is much less prescription over the treatment of ‘subsequent expenditure’ on existing Tangible Fixed Assets, which means there will be more scope for you to determine how to treat this type of expenditure.
- There will be significant changes in Accounting For Investment Properties as changes in ‘fair value’ will be recognised in the P&L account, rather than in the balance sheet at open market value. However gains in value will not be treated as profits that can be distributed to shareholders.
- FRS 102 is also more subjective in regard to how leasing arrangements are treated, with eight different scenarios that could imply that there is a finance lease, which may lead to an increase in finance leases.
Acknowledgement – the above points have been summarised from an article on Accounting Web, to read the full article go to: The new UK GAAP: FRS 102 explained.
Posted by Linda Eziquiel