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Key changes that practises may come across under the new UK GAAP

written by Editor, 19 February 2016

Guest Blog by Briony Kempton, Head of Accounts Production, UK Tax & Accounting

In my last blog I highlighted the changing regulatory landscape in the UK GAAP impacting a number of entities be that corporates, charities or LLPs.

Small companies can still apply the FRSSE for their December 2015 year ends – although this is an updated FRSSE (effective January 2015).  However, small companies are also impacted by the introduction of FRS 102.  For accounting periods beginning on or after 1 January 2016 the FRSSE will be withdrawn and small companies will have to apply Section 1A of FRS 102 (early application is permitted).  Section 1A sets out the presentation and disclosure requirements for small entities based on the new small companies’ regime within company law.  The recognition and measurement requirements of FRS 102 will apply to companies applying Section 1A. A new micro entity standard, FRS 105, will also be effective for smaller entities, again effective for accounting periods beginning on or after 1 January 2016 (although early application is permitted).

For larger entities with December 2015 year ends the first year of accounts preparation under the new standards (IFRS, FRS 101 and FRS 102) is now under way.  Practices will be addressing the implications of the changes between old UK GAAP and the new standards for their clients.
If we take FRS 102 for example a simple search on the internet will highlight the main changes that are impacting financial statements.  Some are highlighted below:


Investment Properties

Under old UK GAAP, SSAP 19 had an exemption for properties that were let to and occupied by other group entities which excluded them from its scope.  FRS 102 has no such exemption and therefore properties treated as fixed assets under SSAP 19 may now have to be classified as investment properties under FRS 102 (for the holding company’s accounts, not on consolidation).  In addition, under old UK GAAP, investment properties were held at their open market value with changes in value recognised in the STRGL.  FRS 102 requires that investment properties are initially recognised at cost and subsequently held at fair value – with fair value movements being recognised in the profit and loss account.

Goodwill and intangible assets

Unlike FRS 10, FRS 102 does not permit an indefinite life.  All intangible assets and goodwill are presumed to have a finite life.  Where a finite life cannot be estimated FRS 102 states that the useful economic life must not exceed 5 years – this is in contrast to FRS 10 which stated a rebuttable presumption that the useful economic life would not exceed 20 years.

Holiday pay accrual

Under old UK GAAP there was no explicit requirement to take account of unused holiday entitlement at the end of the financial year.  Under FRS 102 an accrual is required for this unused holiday.

Defined benefit pension scheme – net finance cost

The net finance cost under old UK GAAP was derived from the yield on the scheme assets less the discount rate applied to the scheme liabilities.  Under FRS 102 the finance cost is derived by applying the discount rate to the net scheme liabilities.

The above are a few of the key changes that practises may come across in the drafting of their clients’ accounts under the new UK GAAP. In addition there are changes in the terminology which can be used in the financial statements.

The feedback we are getting from customers is that is difficult to envisage what a set of FRS 102 financial statements will actually look like for a particular client until you run the numbers through and assess the various impacts of the changes in accounting policy and the potential requirements for additional disclosures.

In a busy practice where time is money, you don’t want to be wasting time through inefficiencies. The use of standard templates and simple data capture drives efficiency throughout the accounts preparation process, easing the time pressing of client reporting deadlines. The most intuitive final accounts production software is available, Digita Accounts Production Advanced offers a modern interface with increased flexibility and functionality, ensuring that it caters for all practices.


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