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Annual accounts for a new CIC- FRS 102 or 105?

How should payments to a director for professional services unrelated to Director role be disclosed?

Good Morning 

I am a co-director of a small CIC whose main activity is organising community music activities and I am preparing the accounts for our first year of trading.  I understand that CICs are subject to the same accounting requirements as limited companies apart from an additional requirement to submit a CIC 34 Report to Companies House along with the accounts.  As we are a small operation with low turnover (less than 10K) and straightforward accounts (no fixed assets, long-term liabilities, share capital or shareholders) I believe that FRS 105 for micro-entities would be the most appropriate standard to use for preparing our accounts.  I would appreciate some advice on the following points;

Neither myself or the other co-director have received any payment for our role as directors.  However, the other co-director is also a self-employed musician and has been paid fees for his services as a musician (teaching, leading workshops, jam-sessions, etc). These payments are included (along with payments to other musicians) in the accounts under Cost of Sales as they are direct costs rather than administrative expenses.

I understand that transactions with company directors need to be disclosed in order for the accounts to show a true and fair view but am unsure as to how this is done under FRS 105.  Do these payments constitute a Related Party transaction?  My understanding is that FRS 105 does not allow for the disclosure of such transactions and therefore the accounts would have to be prepared under FRS 102 1A.  Is this correct?

Your advice would be greatly appreciated

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08th Jun 2018 10:31

Under FRS 105, you only need to disclose

1. Directors'advances, credits and guarantees
2. Guarantees and other financial commitments
3. Average number of employees

Imho, the transactions you describe don't fit into any of these categories, although "credits" is a moot point.

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to lionofludesch
13th Jun 2018 12:55

Agreed!

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By ShayaG
13th Jun 2018 11:23

I'm not sure you can use FRS105 for CICs. ICAEW certainly don't think so

https://www.icaew.com/technical/financial-reporting/new-uk-gaap/frs-105-...

"In addition the following types of entity are excluded from being treated as a micro-entity: charitable companies, investment undertakings, financial institutions, subsidiaries that are fully consolidated in group accounts and parent companies that prepare group accounts."

Not sure about the new CIOs only registered with Charity Commission and not with Co House.

EDIT: this is S384B Companies Act 2006.

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to ShayaG
13th Jun 2018 11:14

Which excluded category do CICs fall into there ?

Charitable company ? No.
Investment undertaking ? No.
Financial institution ? No.
Subsidiaries fully consolidated ? No.

CIOs have their own specific framework.

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By ShayaG
to lionofludesch
13th Jun 2018 11:22

I think you are referring to CIOs not CICs.

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to ShayaG
13th Jun 2018 15:43

I referred to both CICs and CIOs in turn. What's your point ?

Why do you think ICAEW think CICs are excluded from using FRS 105 ?

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By ShayaG
to lionofludesch
13th Jun 2018 15:33

S384B companies act still seems relevant, but I take your point that the regulator here is the CC. I guess the thinking was that because FRS105 as framed is ultra rigid, charity appropriate terminology like surplus / deficit rather than profit / loss isn't available.

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to ShayaG
13th Jun 2018 15:45

Quote:

S384B companies act still seems relevant, but I take your point that the regulator here is the CC. I guess the thinking was that because FRS105 as framed is ultra rigid, charity appropriate terminology like surplus / deficit rather than profit / loss isn't available.


My point is definitely not that the CC is the regulator of a CIC.
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to ShayaG
13th Jun 2018 12:54

I'm in agreement with Lion, there's nothing to stop a CIC from filing accounts under FRS105 framework.

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By ShayaG
to Rob Lelliott
13th Jun 2018 15:31

The fact that it is literally a charitable company.

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to ShayaG
13th Jun 2018 15:44

Literally ?

You're inventing your own facts.

A CIC is not a charitable company.

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By ShayaG
to lionofludesch
13th Jun 2018 16:11

OK, not literally, but the same objection - that the rigid terminology of FRS105 would be inappropriate to a not for profit - would apply.

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to ShayaG
13th Jun 2018 17:33

I'm reluctant to say this but - rubbish.

A CIC is not necessarily "not for profit" if I may be permitted to use a double negative.

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By JWB
18th Jun 2018 13:49

I think payments made to the Director should be disclosed in section 3, Directors remuneration on the CIC34 form as it would not be showing on the accounts ...

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