FRS 102 Overview. C&AG: Kathleen Bonner, Ronan Waters Date: 20/10/2016

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1 FRS 102 Overview C&AG: Kathleen Bonner, Ronan Waters Date: 20/10/2016

2 Hello and Welcome A little about us

3 Presentation Outline Office of the Comptroller and Auditor General (OCAG)audit function OCAG FRS102 preparation What is FRS102? Main differences between previous GAAP and FRS102 Common FRS102 Pitfalls - OCAG audits Useful Websites

4 Office of the Comptroller and Auditor General Where we are: - 3A Mayor Street Upper, Spencer Dock, Dublin 1. Who we audit - Who we audit financial, health, education sectors. - Includes majority of Workshop attendees. We do not audit Local Authorities that is the responsibility of Local Government Audit Service.

5 OCAG FRS 102 Preparation OCAG client briefing Dublin Castle (September 2014) Prepared Template of Accounts. Agreed format with IOTs. Currently being finalised for Universities. OCAG Letter of Engagement has addressed FRS102 for the last two years.

6 What is FRS102? - A new set of financial reporting standards published by the Financial Reporting Council (FRC) to replace previous standards. - Applicable for accounting periods beginning on, or, after 01 Jan Number of key differences between previous GAAP and FRS On the plus side, it is approx. 300 pages while previous GAAP was over 3,000 pages! - More user friendly.

7 The Main Differences between previous GAAP and FRS102: 1. Format of Financial Statements. 2. Accounting Polices and Notes. 3. Changes in Accounting Treatment under FRS FRS 102 Transition Adjustments Note.

8 1. Format of Financial Statements. Naming of Primary Statements: FRS102 allowed some flexibility on naming of financial statements. DPER Circular 21/2015 prescribed the names to be used by bodies audited by OCAG. Titles of Primary Financial Statements under previous GAAP: Income and Expenditure Account. Statement of Total Recognised Gains and Losses (STRGL). Balance Sheet. Cash Flow Statement. Titles of Primary Statements to be applied under FRS 102: Statement of Income and Expenditure and Retained Revenue Reserves. Statement of Comprehensive Income. Statement of Financial Position. Statement of Cash Flows.

9 - Main Changes in Terminology: Previous Term: Land and Buildings. Pensions. Debtors. Creditors. Stocks. Tangible Assets. New Term under FRS102: Property and Plant. Retirement Benefits. Receivables. Payables. Inventory. Property, plant and equipment.

10 2. Accounting Policies and Notes Previously, there was a separate Statement of Accounting Policies. Under FRS102, the accounting policies will now form part of the notes after the Primary Statements i.e. Included as part of the notes to the Financial Statements. Statement of Compliance First year of adoption. Accounting Policies must state that they were prepared in accordance with FRS102. Must include critical accounting estimates and judgements.

11 3. Main changes in Accounting Treatment under FRS Lease Commitments: Disclosure of operating leases is different under FRS 102 compared to previous GAAP. Under FRS 102, the total amount of non-cancellable operating lease payments due right to the end of the contract must be disclosed. To be split between the amounts due: (i) within one year; (ii) between two and five years; and (iii) over five years. - Disclosure of Wages and Salaries above 60K. - Short-term Employee Benefits Holiday Pay: FRS102 requires entities to accrue for short term annual leave benefits not previously accounted for. - Investment Properties: Under FRS102 Investment Properties should be measured at fair value. Annual changes to the Fair Value are taken through the income statement.

12 4. FRS 102 Transition Adjustments Note. An entity's first set of financial statements prepared under FRS 102 must contain a transition adjustments note. For accounting periods ending 31 December 2015, the entity must show the following: - a reconciliation of the surplus for Y/E 31 Dec a reconciliation of the closing capital and reserves as at 31 Dec a reconciliation of the opening capital and reserves as at 1 Jan 2014.

13 Timeline of Transition General Timeline of Transition Institute of Technology

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19 OCAG Audits Common FRS102 Pitfalls New format of Accounts not applying correct primary statement titles/new terminology. Not including accounting policies in notes to the Financial Statements. Not providing for holiday pay accrual Only disclosing annual lease commitment rather than total future lease costs.

20 Useful Links Office of C&AG Oireachtas D/PER

21 Thank you for listening.