This Content Was Last Updated on February 9, 2017 by Jessica Garbett
The new standards apply if your turnover is under £10.2m.
Yesterday (19 February) the FRC launched a consultation on three financial reporting exposure drafts (FREDs) that make amendments to UK GAAP and base them on the FRS 102 framework:
- FRED 58 Draft FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime
- FRED 59 Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Small entities and other minor amendments
- FRED 60 Draft amendments to FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework.
The key changes proposed in the three FREDs include:
- the withdrawal of the FRSSE for accounting periods beginning on or after 1 January 2016
- a new accounting standard for micro-entities (FRS 105) based on FRS 102
- new recognition and measurement requirements for other small entities outlined in a new section of FRS 102 but with reduced presentation and disclosure requirements compared to the full standard
- greater flexibility in relation to the format of the profit and loss account and balance sheet in FRS 101, allowing the use of IFRS-based presentation requirements similar to those used for group accounts.
The proposals are intended to be effective for accounting periods beginning on or after 1 January 2016, with early application permitted for accounting periods beginning on or after 1 January 2015.
Companies qualifying as small under the increased Companies Act thresholds (Turnover £10.2m, Balance Sheet total £5.1m, employees 50) will therefore be able to apply FRS 102 for small entities from 1 January 2015 rather than apply full FRS 102.
Each FRED includes a number of consultation questions relating to specific issues on which the FRC is particularly interested in receiving comments from stakeholders.
Some of the most significant questions are:
- should the small entities section of FRS 102 include different recognition and measurement criteria from those applicable to larger entities?
- should FRS 105 for micro-entities use the same language and terminology of FRS 102?
- is the level of simplification in FRS 105 compared to FRS 102 appropriate?
- is it appropriate mandate the expensing of borrowing and development costs in FRS 105?
Article contributed by ACCA In Practice