How will implementing FRS101 and FRS 102 affect my business?

This is a complex area.

For accounting periods beginning on or after 1 January 2015 you will probably need to change your reporting.  In essence, you will need to decide whether you are going to opt for one of:

  • New UK GAAP (Generally Accepted Accounting Principles)


  • IFRS (International Financial Reporting Standards).

For some, the decision will be easy; others need to take a number of factors into account.  Whichever camp you are in you need to talk to your accountant to make sure you get it right – adopting a new GAAP means changing more than the numbers and decisions taken now will affect your future financial position.

Let’s cover off the easy one first – FRS 101 applies to subsidiaries of listed companies that have adopted IFRS (International Financial Reporting Standards).  If you are in that category you would most likely have already received direction from your holding company.

The adoption of FRS 102 is potentially far more complex and will lead to some changes to the format of the financial statements and the disclosures required, but for many businesses there will be changes to the numbers as well.  FRS 102 will change:

  • the recognition criteria for various assets and liabilities
  • the basis on which some items are measured
  • the treatment of certain gains and losses

compared to current UK GAAP.

The starting point for applying FRS 102 will be to restate the opening balance sheet at the start of the comparative period for the first accounts prepared under FRS 102. This is known as the date of transition.  So, if a company prepares its first accounts under FRS 102 for the year ending 31 December 2015, its date of transition will be 1 January 2014.

The important point, therefore, is that if you are adopting FRS102 from 1st January 2016 you actually need to go back to restate the balance sheet as at 1st January 2015 so that you can do comparatives and work out prior year adjustments.  This can be pretty time consuming and to assess how long it will take you will need to consider each of the following categories and work out whether or not adoption of FRS102 would produce different answers from existing UK GAAP.

To simplify things we have produced 2 answers – this, the abbreviated one.  If you have any of the following asset/liability categories you might want to read the “full fat” version – which we have incorporated in our Blog No.72.  Click here to be taken to the blog.

  1. Investments in listed shares
  2. Investment property
  3. Financial instruments  
  4. Accounting for business combinations  
  5. Intangible assets and goodwill 
  6. Defined benefit pension schemes   
  7. Lease accounting 
  8. Deferred tax
  9. Foreign exchange

Do feel free to contact Tectona if you need more guidance on this complex topic.  Contact Tectona.

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