FRS 102: Pitfalls to avoid

Pitfalls
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Steve Collings looks at some of the pressing issues first time adopters and second-time preparers might want to consider before the next accounts preparation or audit exercise. 

As 2016 draws to a close, many companies will either be preparing to complete their second set of accounts under FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland, or  be preparing to adopt the standard for the first time because they are dealing with small companies with 31 December 2016 year-ends. 

A lot of companies have already gone through the transition process and have prepared accounts under FRS 102.

There are now some real life experiences and more emerging issues coming to the surface as to how the implementation of the standard went as well as the quality of the accounts that have been produced.

We've examined the feedback and reviews of preparers that have already gone through the transition.  

Accounting policies

Accounting policies, along with disclosures in the financial statements, have always seemed to be a contentious subject. Many practitioners rely on automated accounts production software systems to get things like accounting policies and disclosure notes correct, but these will usually only produce the bare minimum and are often not tailored to the client’s specific circumstances.

 This problem, unfortunately, does not go away under FRS 102. In fact, the issue seems to be more of a problem for companies at the smaller end of the scale with some practitioners dealing with early adopters that have now become small under new Companies Act size thresholds complaining that the accounting policies produced by their software are ‘overkill’. 

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Steven Collings
Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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08th Nov 2016 11:15

Several of my clients have investments previously recognised at cost. I need to tell them that suddenly they need to report the investments at fair (market) value (they are too big to be micro-entities) and pay corporation tax on the gains that previously have been unrecognised. For some clients these gains are very significant. I understand that these gains can be spread over 10 corporation tax years as a transitional arrangement.

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By coland
to Ian Lawrence
17th Nov 2016 10:56

Surely there is a difference between reporting fair market value against cost, with the increase being taken to a revaluation account, and returning a gain for computation purposes when the investments are sold.

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to coland
18th Nov 2016 09:09

Under FRS102 1 (a) I understand the gains from cost to fair market value suddenly come into tax even if the investments are not sold. But we are able to spread these over 10 years

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14th Nov 2016 13:10

A good article, lets not drop FRS 102 of the radar the ramifications will go on for years. Small Companies must comply very soon. Yes i think we are all replying on our Accounting Software to some degree.

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By PERMON
30th Dec 2016 02:19

It would be a useful exercise for practitioners to know which software providers prove to be most effective in producing uptodate and appropriate formats

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