1 Contents The Reporting Framework 2015 & 2016 FRS 102 - PDF document

Welcome FRS 102 CIMA Webinar December 2014 Presented by: Adrian Gibbons BSc ACA 0845 450 5555 www.swat.co.uk Making your practice compliant, efficient and profitable Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 2 Contents FRS 102 Section 35 Transition FRS 102 Section 12 Other Financial Instruments FRS 102 Section 29 Income Tax FRS 102 Section 19 Goodwill 3 1

Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 4 Accounting Framework NOW Small Co Med & Large Co FRSSE SSAPs & FRSs Micro Page 3 5 Accounting Framework NOW Small Company Limits Small Co Med & Large Co Turnover < £6.5M Gross Assets< £3.26M EEs < 50 FRSSE SSAPs & FRSs Micro Entity Limits Micro Turnover < £632K Gross Assets < £316K EEs < 10 Page 3 6 2

Accounting Framework 1/1/ 2015 Medium & Small Micro Co Large Co FRSSE 2015 FRS 102 FRSSE 2015 Micro entity bits Page 4 7 Accounting Framework 1/1/2016 Medium & Small Micro Co Large Co FRSME FRS 102 Based on FRS 102 Reduced disclosure Page 4 8 Accounting Framework 1/1/2016 Medium & Small Small Company Limits Micro Turnover < £10.2M Co Large Co Gross Assets < £5.1M EEs < 50 FRS 102 FRSME Reduced disclosure Page 4 9 3

A Basic Balance Sheet Property Plant & Equipment Stock & WIP Trade Receivables Trade Payables Ordinary Loans Slide Only 10 Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 11 FRS 102 The Financial Reporting Standard Applicable in the UK & Republic of Ireland Issued March 2013 - Updated August 2014 (Further Update 2015?) AP beginning on or after 1 January 2015 Page 6 12 4

FRS 102 - Formats Topic – by sections Public benefit entities Prefix PBE Some sections have implementation guidance Page 6 13 FRS 102 – Transition Rules FRS 102 UK GAAP FRS 102 Section 35 Page 6 14 Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 15 5

Section 3: Financial statement presentation An entity may use titles for the financial statements other than those used in this FRS as long as they are not misleading CA 06 Headings Page 7 16 Section 3: Financial statement presentation Accounts must say that they comply with FRS 102 Explicit & Unreserved This would be Note 1 after the primary statements Page 7 17 Section 3: Complete set of Financial Accounts Either Single statement of comprehensive income Or Income statement & statement of other comprehensive income A statement of financial position at the reporting date Page 9 18 6

Section 3: Complete set of Financial Accounts Cash flow Notes Compliance with FRS 102 Significant accounting policies Other information Each statement must have equal prominence Page 10 19 Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 20 Section 5: Example AB Limited Single Statement Page 12 21 7

Section 5: Example AB Limited Single Statement Page 12 22 Section 5: Example AB Limited Two statements Page 13 23 Section 5: Example AB Limited Two Statements Page 13 24 8

Section 5: Exceptional Items Exceptional not used No explicit requirement to disclose on the face of the statement of comprehensive income FRS 102 Requirement to disclose material items Page 15 25 Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 26 Section 6: Changes in equity & statement of income & retained earnings Statement of changes in equity presents: Profit or loss for the period Other comprehensive income for the period Changes in accounting policies Material errors Investments by and dividends & other distributions to shareholders Page 16 27 9

Section 6:Example Page 17 28 Section 6:Example Page 17 29 Section 6: Statement of income & retained earning Simplified statement to replace full statement of changes in equity Used if the only changes are: Profit or loss for the period Payment of dividends PYA Combines the statement of income with the retained earnings statement Page 17/18 30 10

Section 6: Statement of income & retained earning Example Page 18 31 Section 6: Statement of income & retained earning Example Page 19 32 Contents The Reporting Framework 2015 & 2016 FRS 102 Overview FRS 102 Section 3 Financial Statements FRS 102 Section 5 Statement of Comprehensive Income FRS 102 Section 6 Changes to Equity FRS 102 Section 7 Cash Flows 33 11

7. Statement of cash flows FRS 102 FRS 1 Operating activities Net cash inflow from operating activities Taxation Equity dividends paid Ret. on investments & servicing of finance Investing activities Capital expenditure & financial investment Acquisitions and disposals Financing activities Financing Equity dividends paid Ret. on investments & servicing of finance Page 19/20 34 7. Statement of cash flows Cash and cash equivalents Page 20 35 7. Statement of cash flows Direct or indirect methods allowed Need to convert cash flow statement for prior year on conversion Other key points: Disclosure of cash unavailable for use with management commentary No reconciliation of movement in cash to movement in net debt Page 20/21 36 12

Contents FRS 102 Section 35 Transition FRS 102 Section 12 Other Financial Instruments FRS 102 Section 29 Income Tax FRS 102 Section 19 Goodwill 37 Transitional Arrangements FRS 102 UK FRS 102 GAAP Sec 35 Page 22 38 First time adoption of FRS 102 Mandatory for Accounting Periods starting on or after 1 January 2015 Section 35 Applies to the first accounts on which the entity makes an explicit and unreserved statement of compliance with FRS 102 Page 22 39 13

First time adoption of FRS 102 Transition date Start of the previous period for the comparatives Page 23 40 Example Entity X Limited UKGAAP to FRS 102 Y/E 31 December 2015 Transition date 1 January 2014 Page 23 41 Para 7 Section 35 FRS 102 Opening statement of position Measures all assets & liabilities in accordance with FRS 102 Page 23 42 14

Para 7 Section 35 FRS 102 Some assets and liabilities may have different values under FRS 102 when compared to the old accounting treatment Page 23 43 Para 7 Section 35 FRS 102 Example Investments at cost may need to be valued at fair value Deferred tax will be needed for any asset that has been revalued Page 23 44 Entity X Limited Deferred Tax Adjustment Property revalued under FRS 15 Has a revaluation reserve Deferred tax now needs to be recognised on the revaluation gain Page 23 45 15

Entity X Limited Deferred Tax Adjustment Must account for the deferred tax at the transition date 1 January 2014 Dr Revaluation Reserve Cr Deferred Tax Provision Page 23/24 46 Entity X Limited Fair Value Adjustment Forward Foreign Exchange contract 12 November 2013 Purchase 220K euros at 1.1 Dated 12 February 2014 Not recognised under UKGAAP Page 24 47 Entity X Limited Fair Value Adjustment Under FRS 102 this needs to be valued at the transitional date at fair value Bank Fair Value 1 January 2014 = £20K Transitional TB will need to recognise the new asset at 1 January 2014 What is the tax impact of this? Page 24 48 16

Change of Accounting Policy Practical Issues Accounting software may not cope with the PYA The preparation of the accounts for the first FRS 102 period may take longer and cost more Directors need to plan in advance for the impact of FRS 102 Page 24 49 Disclosures An entity must explain how the transition from current UKGAAP to FRS 102 has affected its reported financial position Three reconciliations are required Page 25 50 Disclosures An equity reconciliation At the transitional date and At the end of the last period to be prepared under the old UKGAAP Page 25 51 17

Disclosures A profit & Loss account reconciliation for the last period completed under the old UKGAAP Examples of this disclosure are given later Page 25 52 Disclosures – X Limited Y/E 31 December 2015 Equity reconciliation’s as at I January 2014 & 31 December 2014 P&L account reconciliation Y/E 31 December 2014 Page 25 53 Prohibition on Retrospective Restatement Section 35 has 5 areas where retrospective adjustment to previous transactions are not permitted on transition Page 26 54 18