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FRS 102 - a big change?

Gemma Roger

In the summer of 2014 I had my first baby; this was a big change from my previous life with no responsibilities. I returned to work the following summer where another big change was underfoot… the introduction of FRS 102.
What is FRS 102?
FRS 102 is the new Financial Reporting Standard that applies to companies and groups in the UK and Republic of Ireland. It sets the rules and principles that define how companies must prepare their accounts including the options available for recording transactions and the disclosures that are required.  
Gemma Roger
I am an Audit Senior at Moore in Peterborough; I have worked at the firm for six years including three years training towards my ACA qualification which I achieved in 2013.

The best thing about my job is getting to know people and their businesses; I like to think that I am an approachable team member, more than just a number cruncher!
So how do the two compare and how will the new standard change the life of your company?

Life will never be the same again
OK, that’s rather dramatic, but the new accounting standards are a permanent change (much in the same way as bringing home a baby!). The requirements of FRS 102 replace the previous principles used to prepare accounts; governing what is prepared and how. Whilst this can initially be daunting and may call upon new information that was not previously required, although necessary, ultimately adapting to the new requirements of FRS 102 will be painless!
Key Fact
Early adoption is permitted for medium companies for periods beginning on or after 1 January 2014 or small companies for periods beginning on or after 1 January 2015.

Different people are affected in different ways
The size of your company will affect how and when FRS 102 will impact you. Medium companies will be most affected with FRS 102 applying to accounting periods beginning on or after 1 January 2015. There may be additional disclosure requirements, scope to change how assets/liabilities are accounted for and in some cases transactions that were not previously accounted for may need to be recorded.

Under FRS 102 small companies will have to follow the same basic accounting principles as medium companies but will prepare simpler accounts with the standard setting out 13 mandatory notes for disclosure. For most small companies there will be no significant changes.
Key Fact – information on public record
Abbreviated accounts are being abolished. Small companies will be allowed to submit abridged accounts (with no Directors Report or Profit and Loss account) to Companies House.
Key Fact
For periods beginning on or after 1 January 2016 a company will remain small until it breaches any two of the following three conditions for two consecutive years:
  • £10.2m maximum turnover
  • £5.1m maximum gross assets
  • An average of 50 employees

Any mum will tell you the impact of a toddler’s finger prints and food stains. Luckily the impact of FRS 102 on the appearance of financial statements is less dramatic and certainly less messy!

Medium companies are now required to include a Statement of Changes in Equity. Some disclosure requirements may also change and the face of the Cashflow Statement will contain more detailed information under three headings.

The smallest companies will only have to prepare a Directors Report, Profit and Loss account and Balance Sheet with a maximum of 13 required disclosures. 
Key Fact
Micro entities must satisfy two of the following three criteria for two consecutive years:
  • £632,000 maximum turnover
  • £316,000 maximum gross assets
  • An average of 10 employees
lso they may not be in a group where group accounts are being prepared.  Such entities are permitted under FRS 105 to prepare Micro Entity accounts consisting of a Profit and Loss account, Balance sheet and two prescribed notes.

Change inevitably leads to some kind of form filling or answering new questions (be those from a health visitor or an auditor!)

In the case of FRS 102, it is likely that further information may be required for the year of transition and the comparative year where disclosure changes apply; so expect to be asked to provide more information and historical information if required.

Key areas of change include:
  • Investment Property
  • Leasing Commitment disclosures
  • Treatment of financial instruments
Change is often associated with cost and in the case of a new baby that certainly is the case.

The changes to financial statements and disclosures in the year of transition are likely to incur further work, but this one off cost will be minimal and necessary in setting up a good foundation on which to prepare FRS 102 accounts.

It is also worth noting that in some cases, changes to the treatment and value of assets and liabilities under the new reporting rules may impact on reported profits and therefore the tax position of the company.

Trust and advice
A time of change is a time for decisions to be made, and whether those decisions relate to home life or business, it is important to have someone knowledgeable to trust and consult for advice.  My mum has been invaluable to me since my baby was born; but unfortunately isn’t available for general consultation!

With big changes abound, it is important to know that Moore have the knowledge and expertise to ensure that the decisions you make under FRS 102 are well informed and right for you and your business.

20 months down the line and I can’t imagine life without my little boy; and we are getting more comfortable with FRS 102 too. The changes have been daunting but it hasn’t taken long to settle into the new routines, requirements and expectations of the new standard (and motherhood!)