FRS 102/105: Are you ready?

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Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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A new year – a new UK GAAP comes onto the scene. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland is now with us.

Many practitioners across the country will be gearing up to handle the challenges that this new financial reporting framework brings with it. The last 12 months have also seen considerable changes on the horizon for small and micro-entities that will be required to move across to new frameworks for accounting periods commencing on or after 1 January 2016 (typically December 2016) year-ends.

This article looks at some of the emerging issues that have cropped up over the last year in relation to FRS 102 and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime.  Further articles dealing with the technical aspects of FRS 102 and FRS 105 will also be published throughout the year to assist practitioners in understanding and interpreting the requirements of this new regime...

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  • Unlisted companies which are not small
  • Goodwill
  • Cash flow statement
  • Reduced disclosures for group members
  • Date of transition
  • Disclosure requirements
  • Sompanies subject to the small companies regime
  • Other Points Relevant to FRS 102 (for small and medium-sized companies)
  • Investment property fair value gains and losses
  • Deferred tax
  • Loans at below market rates
  • Micro-entities
  • Conclusion

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New rules on loans at below market rates

Not at all surprising the article describes the new rules on loans between group entities as contentious...

Under the new rules, the guidance implies there's an increase in investment for the lender and distribution of capital for the borrower wherever the rate of interest charged is below 'market rates'. See page 6 of: https://www.frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Po...

Often loans between two group parties are made free of interest where both parties are under common control and there's 100% ownership. Whatever rate is charged, it's nil gain or loss from the group's perspective.

I'd be interested to here what others views are on:

determining a market rate of interest for inter-group transactionswhat, if any the likely tax implications for increasing the investment in a group undertaking are

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Intercompany Loans

Hi All,

Just wonder if you could advise me on this.

We have provided an Intercompany loan to our parent company back in 2008 for their WC requirements. The conditions were, we will give them €3.6M of a loan payable with 180months equal instalments 20K a months and plus charge them back Euribor Rate + 1% margin. Since 2008 we have received a total of 720K and the payments of principle amount of 20K stopped due to a management decision in 2011. Since then we have been only charging them the Euribor Rate + 1% margin and the loan agreement will be completed in 2023. The interest charge is only treated as a financial statement entry and no cash transaction happened since. There is no going concern issue either. On the other hand we have been paying this to our bank were we borrowed the 3.6M with similar condition (paying back 20K a month for 180 months plus the banks interest charge).

I need your help and advice how to treat this when changing over from the old UK GAAP to the new FRS102? I would appreciate if you could advice and help.

 

Regards,

HK

Thanks (0)

Intercompany Loans

Hi All,

Just wonder if you could advise me on this.

We have provided an Intercompany loan to our parent company back in 2008 for their WC requirements. The conditions were, we will give them €3.6M of a loan payable with 180months equal instalments 20K a months and plus charge them back Euribor Rate + 1% margin. Since 2008 we have received a total of 720K and the payments of principle amount of 20K stopped due to a management decision in 2011. Since then we have been only charging them the Euribor Rate + 1% margin and the loan agreement will be completed in 2023. The interest charge is only treated as a financial statement entry and no cash transaction happened since. There is no going concern issue either. On the other hand we have been paying this to our bank were we borrowed the 3.6M with similar condition (paying back 20K a month for 180 months plus the banks interest charge).

I need your help and advice how to treat this when changing over from the old UK GAAP to the new FRS102? I would appreciate if you could advice and help.

 

Regards,

HK

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frs105 cash flow statement

No mention made of cashflow statements for 105 micro entities - we can take it that these are not required?

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Changes, oh my gosh

Its probably to early to lay the above article on my head at 9.23am however I hope Accountancy software will help guide me around the rule changes, I am a bit unsure of it all. I am sure by 2018 i will have got my head around it all.

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Plus ca Change

Are new rules that we seem to get with depressing regularity the result of closing important loopholes or simply measures fashioned by people who are concerned with justifying their expensive existences?

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