A recap of the options under new UK GAAP.
If you are, or have clients that are “small” companies or LLPs, you might expect to be able to use a revised version of the FRSSE. But this only applies for 2015 year ends.
From 2016 (or earlier if you choose), the new small entities regime is available, embodied in section 1A of FRS 102. This sets out a general exemption for small entities from all of the disclosure requirements of FRS 102, but it then lists a small number of disclosures that are required instead. The resulting accounts would be expected to be much shorter than a full set of FRS 102 accounts, though it’s not a completely easy ride- look out for another post on this soon.
The very smallest companies will qualify as micros, and can choose to apply the new standard specifically for them, FRS 105. This sets out very simplified accounting, with almost no accounting policy choices, and a complete prohibition on any kind of revaluation (including fixed assets as well as the more judgmental financial instruments). It also has very few disclosure requirements, since EU law prohibits individual states from requiring anything other than the bare minimum.
IFRS Group Companies
As mentioned above, there is no change in the requirements for listed entities to use IFRS in their group accounts. FRS 101 Reduced Disclosure Framework has, however, been designed to appeal to the parent and subsidiaries of such groups. At the moment, many parents and subsidiaries in listed groups use UK GAAP in their individual accounts, because the disclosures in IFRS are too onerous. The RDF addresses this by allowing such qualifying entities to prepare their Companies Act (i.e. normal individual) accounts using the recognition and measurement rules of IFRS, but with a reduced level of disclosure, where those items are disclosed in the group accounts. For example:
- on comparatives (for items such as the fixed asset movement table),
- share-based payments;
- business combinations (a reduction in the level of detail that needs to be disclosed) and;
- various other detailed disclosures.
One point that should be noted is that these RDF accounts need to include all of the normal Companies Act disclosures, as well as the elements still required of IFRS disclosure. This is because they are not IAS accounts under the legislation, but a variant of Companies Act accounts. This could be tricky, but CCH's Interactive Companies Accounts Checklist or ICADC, now includes an RDF checklist, as well as checklists on current UK GAAP and full IFRS.
Other entities (i.e. not small and not using IFRS)
For many companies and LLPs, the new proposals will mean moving from current UK GAAP to FRS 102. Much of the language of FRS 102 is similar to IFRS, but many of the amendments are very UK specific and have sought to maintain the status quo. For many preparers, a lot of the work of transition will be on ensuring that their hunches about having few changes to make are backed up, and on paying cosmetic attention to the accounts, which will need FRS 102-compliant formats and notes, and will need to be updated to ensure descriptions of accounting policies are up to date. To put it another way, the fact that many will have few accounting adjustments does not mean they will have no work to do, but instead that there will be plenty to do to justify the lack of adjustments and ensure full compliance with the new standard.