Eight Key Considerations to Come From Lifecycle's most Recent Accounting Update Seminars
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Lifecycle’s Summer Accounting Update seminars took place following the conclusion of the Financial Reporting Council’s (FRC) triennial review and addressed what it means to accountants.
A number of key queries were posed time and time again. Here, Lifecycle partner and compliance expert Val Steward, who led each of the 13 sessions, covers the top eight considerations that practitioners should bear in mind, both in terms of financial reporting and in respect of some key risk management matters. If they’re doing nothing else, they should be doing these:
#1 Determine the most suitable framework between FRS 105 and FRS 102
Under UK GAAP, most micro‐entities have the option of reporting under FRS 105, the Financial Reporting Standard applicable to the Micro‐entities Regime or FRS 102, the Standard applicable in the UK and Republic of Ireland.
Despite the simpler FRS 105, accounts for many companies that qualify as micro‐entities continue to be submitted under FRS 102 1A.
It’s essential that practitioners consider FRS 105 on a case‐by‐case basis and speak to their clients about which framework to use. Discuss the benefits and pitfalls of each before deciding which standard is most suitable for their business. Not doing so could leave practitioners open to criticism.
#2 Recognise the difference between related party loans and intercompany balances
The treatment of directors’ loans under FRS 102 still causes an element of confusion for some practitioners.
Although there is a concession in the revised FRS 102 for the treatment of director / shareholder loans in small companies, this does not apply to intercompany balances. If these are included as long‐term and interest is not charged, they must still be processed as a complex financing transaction.
#3 One size certainly doesn’t fit all when it comes to accounting policies
Accounting policies should be tailored to a company's individual situation and made more entityspecific. ‘Boilerplate’ accounting policies are very much frowned upon by the regulators.
#4 Make sure the numbers add up when analysing operating leases
Leases have always posed a problem for the accountancy profession because of their subjective nature and ability to manipulate leasing transactions as ‘off balance sheet finance’.
Practitioners should ensure that total obligations over the life of the lease are fully analysed. This can be included as only one figure in FRS 102 1A accounts.
#5 The impact of timings on deferred tax assets
Remember that a deferred tax asset, in respect of trading losses, should only be recognised if it is likely to be reversed in the foreseeable future.
#6 Consider Brexit uncertainty when financial reporting
The UK Government and FRC have issued guidance on accounting and auditing if there's no Brexit deal.
It’s important to remember that FRS 102 1A accounts must still show a true and fair view. So, accountants need to ensure that any significant Brexit‐associated risks are reflected in the accounts submitted.
#7 The heat is on in terms of Anti‐Money Laundering
With the regulators answering to the Office for Professional Body Anti‐Money Laundering Supervision (OPBAS), it is inevitable there is an increased focus on this area.
So, it’s essential that all practitioners closely examine their AML policies and procedures and ensure that they’re being adhered to.
#8 GDPR should not be overlooked
We’re just over a year on from the introduction of the General Data Protection Regulation (GDPR) and, for many firms, it’s been put on the back burner. This can’t be the case.
Accountants hold and deal with vast amounts of confidential client data and must respond to these changes ‐ the way all businesses must now handle data with the GDPR. This means having the appropriate privacy policies in place and ensuring that personal data is only ever communicated in a secure manner.
Those accountants who were unable to attend Lifecycle’s most recent CPD Accountancy Update seminar can now watch the webinar here for free.
About the Lifecycle network:
Lifecycle is a unique network for accountants ‐ provided by the Leonard Curtis Business Solutions Group.
It provides member accountants with a comprehensive range of specialist services ‐ and the expert support required ‐ to improve their client offering at every stage of a business’ lifecycle.
From company formation to cessation and all stages in between.
Lifecycle is free to join and also offers members many additional benefits. These include access to competitively priced Professional Indemnity insurance cover, a regular programme of free training and education and discounts on products and services relevant to their business and clients’ needs.
Services offered by Lifecycle include: Company secretarial and formation; equity finance for SMEs; debt advisory for SMEs; personal debt advice; corporate restructuring, insolvency and cessation; debt finance for SMEs; cashflow maximisation; property solutions and legal services.
By Val Steward, Lifecycle partner and compliance expert.