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Accounts filed FRS 105 but signed under FRS102

Previous accountant prepared under FRS102 but filed FRS105

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Good Afternoon,

I recently got a new client and I am in the process of preparing their end of year accounts. 

However the copy of the previous years accounts that I received from the previous accountant are prepared under FRS 102 but to me it looks like they are filed as micro entity account (FRS 105) at Companies House. 

If I preapre the account under FRS105 then the amount of disclosure notes will be different and may be questioned by the client. 

Does any one else prepare small company accounts for their clients to sign and then file micro entity? My understading would be that if the client signed a copy of the accounts prepared under FRS 102 then that is what you should file with HMRC and Companies House?

Any advice would be appeciated, 

Thanks

Replies (43)

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By paul.benny
06th Dec 2019 15:29

Really?

Have you checked the guidance here, for example:
https://www.gov.uk/annual-accounts

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RLI
By lionofludesch
06th Dec 2019 15:42

Well, despite Paul's cryptic advice, I agree with the OP.

Subject to the right to omit P+L and Director's Report from the stuff sent to CoHo.

You need to have a chat with the client, tell him the previous incumbents have got it wrong and ask him whether he wants FRS 105 or FRS 102 going forward.

He can always have extra stuff for his own management use if that's what he wants.

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By Wanderer
06th Dec 2019 15:46

I also agree with the OP.

Prepare FRS 105 accounts (if client qualifies) and explain to client how you've removed a lot of unnecessary information from the public domain, removed all the superfluous stuff like the accounting policies that next to no-one understands and saved them money in the process.

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By Wanderer
06th Dec 2019 15:52

Mmm
Having said the above, OP I suggest you check your own accounts. Glass houses and all that. You say they've been prepared under FRS102 1A. I'd hazard a guess that they are no where near fully compliant.

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Replying to Wanderer:
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By lionofludesch
06th Dec 2019 16:04

Wanderer wrote:

Mmm
Having said the above, OP I suggest you check your own accounts. Glass houses and all that. You say they've been prepared under FRS102 1A. I'd hazard a guess that they are no where near fully compliant.

That's a helluva bold statement based on the available information.

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Replying to lionofludesch:
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By Wanderer
06th Dec 2019 16:28

Maybe, that's why I said hazard a guess. Having said that much has been said about the inadequacy of disclosure of e.g. Accounting policies, indeed this was one of the ICAEW's hot topics a year or two agree with a big emphasis on not using boilerplate text.
Just checked a set of FRS102 1A accounts filed by us, accounting policies run to two whole pages. Appreciate the OP's accounts may not be as complicated but where's e.g. the creditors policy? Think a Share Capital note is required as well (haven't checked).
Gotta wonder as well why they've gone for FR102 1A, why not just FRS105, appreciate it's their choice.

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By lionofludesch
06th Dec 2019 16:30

Wanderer wrote:

Maybe, that's why I said hazard a guess. Having said that much has been said about the inadequacy of disclosure of e.g. Accounting policies, indeed this was one of the ICAEW's hot topics a year or two agree with a big emphasis on not using boilerplate text.
Just checked a set of FRS102 1A accounts filed by us, accounting policies run to two whole pages. Appreciate the OP's accounts may not be as complicated but where's e.g the creditors policy? Think a Share Capital note is required as well (haven't checked).
Gotta wonder as well why they've gone for FR102 1A, why not just FRS105, appreciate it's their choice.

Accounting policies are, more often than not, overstated.

You only need to state them where you deviate from the standards or where there is a choice. What's the point in saying the accounts comply with the standards and then have two pages of carp reiterating the standards ?

Just my view, obviously.

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Replying to lionofludesch:
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By Wanderer
06th Dec 2019 16:37

Don't get me wrong I agree with you! A lot of it is almost nonsensical, not understood and adds little value. Just we tend to make sure that we follow the sample accounts etc. (not always, sometimes they get things wrong). Makes it much easier however to defend when facing a compliance review.

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By lionofludesch
06th Dec 2019 16:54

I'm just wondering how these folk who keep two sets of accounts explain away the difference in profits caused by deferred taxation.

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Red Leader
By Red Leader
06th Dec 2019 15:56

When FRS102/105 came along I used to prepare 102 for the client due to the more useful disclosures. I then submitted 105 due to the ability to hide sensitive data. Later, I came to the conclusion that most clients paid very little attention to either version! 105 all the way now.

I explain any significant figures in the 105 a/cs in a covering email to the client if necessary.

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Replying to Red Leader:
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By Wanderer
06th Dec 2019 16:32

With you 100%.
Edit: Think you edited after my post. I wouldn't also produce FRS102 accounts. Fortunately the software I use prepares a much more detailed balance sheet as well as the FRS105 one, this together with the management P&L, normally gives all that the client is interested in.

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By lionofludesch
06th Dec 2019 16:05

Red Leader wrote:

When FRS102/105 came along I used to prepare 102 for the client due to the more useful disclosures. I then submitted 105 due to the ability to hide sensitive data.

That's just plain wrong.

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Replying to lionofludesch:
Red Leader
By Red Leader
06th Dec 2019 17:24

I've turned over a new leaf now.

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Replying to Red Leader:
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By towat
11th Dec 2019 09:59

Red Leader wrote:

When FRS102/105 came along I used to prepare 102 for the client due to the more useful disclosures. I then submitted 105 due to the ability to hide sensitive data. Later, I came to the conclusion that most clients paid very little attention to either version! 105 all the way now.

I explain any significant figures in the 105 a/cs in a covering email to the client if necessary.

I did/do the same I go through the detailed P&L with the client then they sign the FRS105 and Micro Entity versions, I used to give them the detailed copy but now mostly just the FRS105.

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By CJaneH
06th Dec 2019 16:08

Because the FRS105 (Micro accounts) show so little I produce both. Telling the client each year that the FRS102 are prepared as management accounts for them.

I do however prepare Micro accounts for the client and get a signed copy for my file before submission to Companies House.

Could that be what happened in this case?

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Replying to CJaneH:
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By lionofludesch
06th Dec 2019 16:15

CJaneH wrote:

Because the FRS105 (Micro accounts) show so little I produce both. Telling the client each year that the FRS102 are prepared as management accounts for them.

Why would you do that ?

Sure - give the client extra schedules but why would the accounts you give them say they're FRS 102 ?

What happens if he pops in to his bank or mortgage advisor and they can't find those FRS 102 accounts on file at Companies House ?

Sure - it won't happen often but it'll bite you on the backside one day.

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By jon_griffey
06th Dec 2019 18:16

I have prepared accounts this week for 2 companies that were done by other accountants last year. In both cases the firms concerned prepared FRS102 for the client and filed FRS105 at Companies House. It seems to me that the practice is rife. Its one of those things whilst perhaps technically illegal, nobody gives a damn about - unless someone complains to your professional body. Not sure what the position is if the client signs both FRS102 and FRS105 versions of the accounts. Which ones are 'the' accounts?

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By lionofludesch
06th Dec 2019 18:22

jon_griffey wrote:

I have prepared accounts this week for 2 companies that were done by other accountants last year. In both cases the firms concerned prepared FRS102 for the client and filed FRS105 at Companies House. It seems to me that the practice is rife. Its one of those things whilst perhaps technically illegal, nobody gives a damn about - unless someone complains to your professional body. Not sure what the position is if the client signs both FRS102 and FRS105 versions of the accounts. Which ones are 'the' accounts?

No doubt you're right.

In the case to which you refer, how was deferred tax dealt with ?

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Replying to lionofludesch:
By jon_griffey
06th Dec 2019 19:17

Deferred tax was ignored in both cases. In fairness it would not have been material.

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Replying to jon_griffey:
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By lionofludesch
07th Dec 2019 10:07

If it had been material, it'd probably have been ignored anyway.

So are they FRS 102 accounts ? Probably not.

Why would anyone think that the client needs a couple of pages of Accounting Policies to help him understand his business ?

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By carnmores
07th Dec 2019 16:56

this is what its all come too. and what a load of old nonsense it is. if you haven't prepared the accounts yourself then you should file what was prepared, i doubt your insurance would cough up if anything untoward happened if you used another accountants figures subsequently altered. BTW DT should go the way of CCA & HCA, its totally unnecessary for all but the bigger companies. its an accountants wealth creating scheme

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By lionofludesch
07th Dec 2019 17:36

I quite like Deferred Tax. It helps match up profits to the tax charge in a way clients understand and they can appreciate that the Deferred Tax on the Balance Sheet is tax that they haven't had to pay yet.

Wealth creating scheme ? Maybe - but I can calculate the transfer for most of my client companies in ten minutes.

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Replying to lionofludesch:
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By carnmores
07th Dec 2019 17:41

A DT calculation and reconciliation in 10 mins is going it a bit but if anybody can do it you can

Nick

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Replying to carnmores:
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By lionofludesch
07th Dec 2019 18:22

Ach - it's (accounts wdv - tax wdv) x tax rate.

Compare that with last year's provision.

Takes longer to write down than calculate.

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Replying to lionofludesch:
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By carnmores
07th Dec 2019 18:44

that doesnt sound like a reconciliation

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By cfield
11th Dec 2019 12:52

Most of the small firms doing FRS 102 accounts for micro-entities probably don't even know what disclosures are actually required. Deferred tax is probably just the tip of the iceberg.

For micro-entities, the only times I use FRS102 are where development costs or deferred tax are significantly high. The latter is quite important where there are material timing differences. You can't have the tax figure going up and down like a yoyo every year when profit is much the same. It's confusing.

Having said that, it's also confusing for the actual tax bill to differ from the figure in the accounts, but you can always explain that and show what a clever clogs you are. They'll be pleased to have an accountant who knows his onions.

I don't understand why people think they've got to do FRS102 accounts just to show more information to the client. All you've got to do is knock up a set of management accounts. You don't need to follow FRS at all for them (just normal accounting principles), you can show a lot more useful detail (e.g. sales analysis) than FRS allows, you can cut out all the useless disclosure that nobody needs to see and you can charge a decent fee for added value.

In my experience, owner/directors want as little detail in the Companies House accounts as possible, especially related party transactions, so FRS105 really is a no-brainer. It only confuses clients if you give them FRS102 accounts too.

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Replying to cfield:
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By lionofludesch
11th Dec 2019 13:04

cfield wrote:

I don't understand why people think they've got to do FRS102 accounts just to show more information to the client. All you've got to do is knock up a set of management accounts.

Exactly. The stat p+l in FRS 102 accounts has about half a dozen lines in it. How can you run you business using only that ?

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Replying to lionofludesch:
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By carnmores
11th Dec 2019 13:22

It could be quicker and easier than doing man acs especially if you use a brilliant program like Taxfiler

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By petestar1969
11th Dec 2019 16:39

Whichever accounts are prepared for the shareholders are the accounts that need to go to Companies House but the filed accounts can be fileted.

If both sets are prepared, 102 and 105, then you need to make it clear to the client that the 102 accounts are for management purposes only.

I found this out at a recent CPD update......

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Replying to petestar1969:
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By lionofludesch
11th Dec 2019 16:47

Well, again, why would the client need all the accounting policies for management purposes ?

Why would a bland six line FRS 102 P+L help him manage his business ?

Give him a detailed P+L and schedules of the balance sheet entries by all means but FRS 102 accounts ? I think not.

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Replying to petestar1969:
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By carnmores
11th Dec 2019 17:23

Disagree but its only a press of a button after all

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By lionofludesch
11th Dec 2019 17:33

carnmores wrote:

Disagree but its only a press of a button after all

It'd be good to hear your reasoning.

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Replying to lionofludesch:
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By carnmores
11th Dec 2019 18:02

and we were doing so well today........

i know of no provision that the accounts prepared for shareholders must be the filed accounts

'Whichever accounts are prepared for the shareholders are the accounts that need to go to Companies House but the filed accounts can be fileted'

so do you have to show the filleted accounts (awful phrase) to the shareholders?

Also depends on whether they approve them surely. i would have thought that most reasonable accountants worth their salt would prepare them on frs 105 and then press a button to change to 102 if for no other reason than to show client how helpful they are.

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Replying to carnmores:
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By lionofludesch
11th Dec 2019 18:19

I'm clearly not making my point that they're not significantly more informative to an owner manager.

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By carnmores
11th Dec 2019 18:47

to a sole owner manager how could i disagree

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By carnmores
11th Dec 2019 22:31

duplicate

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Replying to carnmores:
By cfield
11th Dec 2019 19:31

The days of charging a fat fee for pressing a button are well and truly over. Clients aren't daft you know. They know how much effort something took.

If you mean doing FRS102 for free to show how helpful you are, then you're missing a trick. Clients want proper accounts that show them how their business is really doing. The more insight you can give them, the more impressed they will be. Sales analysis, expenses v budget, breakeven analysis, sales/profit ratios, key performance indicators, return on investment, whatever the client finds useful.

Even if you do them for free, they will not be impressed with a 6 line P&L, 2 pages of accounting policies, half a page of related party transactions, a fixed assets note that doesn't say what the assets are and a debtors analysis that doesn't even tell them who the debtors are. Nor do they want those notes, useless as they are, in their published accounts.

What they want is detailed management accounts full of useful information and as little disclosure as possible at Companies House. It is easy to reconcile the two if the bank or investors want to know.

If you send the shareholders FRS102 accounts, then that is what you must file at Companies House (all you can do is fillet them) so my advice is to steer well clear of that format unless you have to use it for the reasons I mentioned earlier.

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Replying to cfield:
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By carnmores
11th Dec 2019 20:44

I dont charge any fat fees and all my clients know who owes them money so i diagree with your analysis and conclusion

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By lionofludesch
11th Dec 2019 22:26

Well said, cfield.

Couldn't agree more.

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By carnmores
11th Dec 2019 23:14

i clearly don't get this but i see conflation. what use are management accounts after the year end almost all my clients know where they are on a quarterly basis and many on monthly. The historic accounts are basically irrelevant to most

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Replying to carnmores:
By cfield
12th Dec 2019 00:42

Depends how quickly you do them. Not much point if you leave it 9 months, I agree. But I see no point whatsoever in sending them FRS102 accounts just because they are creatable at the touch of a button. You still have all the disclosures to enter first, and for what purpose? They're of no real use to the clients, and would be misleading to other users if FRS105 accounts have already been filed, as it would imply the FRS102 version are the official accounts when they're not. They might also lose credibility if some of the disclosures are missing, as often happens.

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By lionofludesch
12th Dec 2019 08:54

carnmores wrote:

i clearly don't get this but i see conflation. what use are management accounts after the year end almost all my clients know where they are on a quarterly basis and many on monthly. The historic accounts are basically irrelevant to most

That's where I'm confused.

What exactly are you giving them when you say FRS 102 accounts ? Directors' report ? Six line P+L ? And why do you think that's better than the management information which you clearly provide ?

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Replying to lionofludesch:
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By carnmores
12th Dec 2019 09:12

i'm not going to comment further on this thread Lion, its wandering off into the esocteric. I am happy to PM you if it helps.

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