The new accountancy standards: What does FRS 102 mean?

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UK200Group member firm Price Bailey take a look at the new FRS 102 accountancy standards and its impact on businesses.

FRS 102 is currently top of the accountancy buzzword charts. We know it’s not very catchy and it doesn’t exactly have the greatest hook to it, but it’s still very important.

You may have heard it mentioned before, you may not, but it’s happening right now and could have a major impact on financial statements of UK companies.

So what does it mean?

The Financial Reporting Standard (FRS) 102 is the most recent, and most important, of a trio of new UK GAAP (Generally Accepted Accounting Standards) applicable in the UK and the Republic of Ireland.

Simply put, this could mean significant changes to the numbers on your company’s accounts. Because of this, many UK companies now have to alter their financial statements in accordance to the changes.

Who does it affect?

At the moment, FRS 102 sets out the requirements for UK companies that do not currently adopt the FRSSE (Financial Reporting Standard for Smaller Entities), IFRS (International Financial Reporting Standards) or the reduced disclosure framework, which is available to some group companies under FRS 101.

This means that the changes will apply to most medium-sized and large UK companies for the time being.

However, there will also be changes for companies that qualify as small next year.
Small companies can still continue to use the FRSSE for one further year, although they do have the option of early adopting FRS 102 if they wish. This should be considered on a case by case basis as there may be advantages or disadvantages of early adoption.

What changes will FRS 102 make?

Whilst there are a number of subtle changes, there are also some more significant ones. For example areas like the below could be affected:

• Some assets and liabilities
• The measurement basis of some items
• The treatment of certain gains and losses.

The biggest changes could be felt by companies with financial instrument transactions (for example interest rate swaps or forward contracts for foreign exchange), defined benefit pension schemes, investment properties and investments in listed shares.

However, all entities will be affected in some way and in many cases their reported profits will be different.

What is the impact of FRS 102 so far?

So far, for the majority of our clients there has been no material impact on the underlying numbers within the accounts - the only clear difference is the change in appearance due to alterations in some of the terminology.

However, for some companies, the impact can be significant. This can be positive or negative, depending on the specific circumstances.

The full impact will probably be felt next year when small companies are also required to comply with the new standard. However, for many of these companies, the financial impact is unlikely to be significant although it will still need to be considered by every company.

There is a lot of detail with the new FRS 102 changes and each case could be different for each business. Although the key issue is that there will be differences to the way accounts are reported on. But it will also be important to understand what impact these changes can have beyond just the accounts.

If you would like further information or help just visit our dedicated webpage on FRS 102 Services:

As well as being members of the UK 200 group, Price Bailey is a leading firm of chartered accountants and business advisers operating throughout the UK, with global connections.

Tags: UK200

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