Accountants in practice and industry need to understand the implications of the transition to FRS 102 now in order to determine when and how they need to start preparing; waiting until preparing first year FRS 102 accounts may be too late. This presentations looks at the opportunities, as well as highlighting potential pitfalls of the journey through transition.

1. Accountex 2014
New UK GAAP
Chris Malkin
15 May 2015

2. Contents
15 May 2015
1. Recap of new UK GAAP
2. Changes
3. Transition
4. Conclusions
5. Questions
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3. Recap of new UK GAAP
The first steps
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4. Recap of new UK GAAP
The objective
The FRC’s overriding objective in setting accounting
standards:
“Enable users of accounts to receive high-quality
understandable financial reporting proportionate to the size
and complexity of the entity and users’ information needs.”
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5. Recap of new UK GAAP
The aims
• Have consistency with global accounting standards;
• Reflect up-to-date thinking;
• Balance consistent principles for accounting with practical
solutions;
• Promote efficiency within groups;
• Cost-effective to apply.
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6. Recap of new UK GAAP
The standards
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• Outlines which reporting framework to apply
• Application of SORPs
• Effective date and transitional arrangements
FRS 100 Application of
Financial Reporting
Requirements
• Disclosure exemptions from EU-adopted IFRS for
qualifying entities
FRS 101 Reduced Disclosure
Framework
• Succinct financial reporting based on IFRS for SMEs
• Replaces current FRSs, SSAPs and UITFs
• Includes reduced disclosures for qualifying entities
FRS 102 The Financial Report
Standard applicable in the UK
and Republic of Ireland

7. New UK GAAP
FRS 102 – changes from current GAAP

8. Changes
Summary
Vast number of changes between current GAAP and FRS 102
including:
• Terminology;
• Short-term employee benefits;
• Leases;
• Investment properties;
• Financial instruments.
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9. Changes
The terminology
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Company law terminology
Accounts
Balance sheet
Capital and reserves
Trade debtors
Minority interest
Stocks
Trade creditors
FRS 102 terminology
Financial statements
Statement of financial position
Equity
Trade receivables
Non-controlling interest
Inventories
Trade payables

10. Changes
The terminology
FRS 102 paragraph 3.22
“An entity may use titles for the financial statements other than
those used in the FRS as long as they are not misleading.”
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11. Changes
Short-term employee benefits
FRS 102 paragraph 28.3
“An entity shall recognise the cost of all employee benefits to
which its employees have become entitled as a result of
service rendered to the entity during the reporting period.”
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12. Changes
Leases
FRS 102 para 20.4
“A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership.
A lease is classified as an operating lease if it does not transfer
substantially all the risks and rewards incidental to ownership.”
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13. Changes
Investment properties
FRS 102 para 16.7
“Investment property whose fair value can be measured
reliably without undue cost or effort shall be measured at fair
value at each reporting date with changes in fair value
recognised in profit or loss”
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14. Changes
Financial instruments
FRS 102 paragraph 11.8
Basic financial instruments include:
• Cash;
• Debt instruments (such as loan payable or receivable);
• Investments in non-convertible preference shares and non-
puttable ordinary shares or preference shares.
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15. New UK GAAP
Transition to FRS 102

16. Transition
Timeline
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• Early adoption possible31 December 2012
• Date of transition1 January 2014
• Last day of reporting using current GAAP31 December 2014
• Accounting period start date for which FRS 102 must be
used1 January 2015
• First mandatory year end using FRS 10231 December 2015

17. Transition
Retrospective application
Restatement of balance sheet at 31 December 2013 for a 1
January 2014 date of transition:
• Recognise assets and liabilities required by FRS 102;
• Do not recognise assets and liabilities that are not permitted;
• Reclassify items;
• Restate certain assets and liabilities at a different value.
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18. De-recognition of
financial assets and
financial liabilities
Hedge accounting
Accounting
estimates
Discontinued
operations
Measuring non
controlling interests
Transition
The mandatory exceptions to retrospective application
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19. Transition
The optional exceptions to retrospective application
17 optional exceptions including:
• Fair value as deemed cost;
• Revaluation as deemed cost;
• Dormant companies;
• Lease incentives.
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20. Conclusion
What’s next?
• Review every three years;
• Revised FRS 102 effective 2018;
• Conclusion on FRED 54;
• New SORPS;
• Further FRC staff education notes.
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21. Conclusion
What to do now
• Identify which areas affected by retrospective application;
• Keep abreast of changes to legislation;
• Make a start now!
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22. Questions?
exchange@sage.com
sage-exchange.co.uk