30/09/2015. The new regime for small and micro entities. The new regime for small and micro entities. Introduction

Transcription

1 The new regime for small and micro entities 30 September 2015 Download the slides to accompany the webinar /FRFwebinarresources The new regime for small and micro entities 30 September 2015 Introduction Marianne Mau Technical Manager, Financial Reporting Faculty 1

2 Introduction Sarah Dunn Technical Manager, Financial Reporting Faculty, ICAEW Stephanie Henshaw Technical Standards Partner Francis Clark LLP Ask a question Participate in today s webinar send us a question Audio problems if you experience poor sound quality you may benefit from selecting Use Telephone from your Audio Mode settings Downloading the slides /FRFwebinars (/FRFwebinarresources) 2

3 Contents Overview The new small companies regime The micro-entities regime Practical considerations The new regime for small and micro entities OVERVIEW Background to the new regime June 2013 New EU Accounting Directive approved March 2015 UK Government approves changes to company law July 2015 FRC issues new and revised accounting standards 3

4 Big changes for UK small companies regime Size limits Eligibility criteria Formats Disclosures Filing Size limits Small companies revised Turnover Balance sheet total Average employees 10.2m (previously 6.5m) 5.1m (previously 3.26m) 50 (no change) Micro-entities no change Turnover 632,000 Balance sheet total 316,000 Average employees 10 Eligibility criteria Under the new rules a group is ineligible if a traded company eg, with transferable securities traded on a regulated market, is a member (previously the law referred to a public company). Therefore, certain small companies will no longer be excluded from the small companies regime. For example, small companies that are members of a group that includes an AIM quoted company or unlisted public limited company. 4

5 UK Financial Reporting Regime 2016 EU-adopted IFRS Reduced Disclosure Framework (FRS 101) Mandatory for listed and AIM companies Can be voluntarily adopted by most other companies Qualifying entities who otherwise adopt the recognition, measurement and disclosure requirements of EU-endorsed IFRS The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) The Financial Reporting Standard applicable to the Micro-entities Regime (FRS 105) For all entities not applying EU-adopted IFRS, FRS 101 or FRS 105 FRS 102 Section 1A Small Entities sets out different presentation and disclosure requirements Available to micro-entities as defined by CA 2006 Revised framework for small and micro entities Micro-entities Small entities Micro-entities regime and FRS 105 Small companies regime and Section 1A of FRS 102 Small companies regime and Section 1A of FRS 102 FRS 102 (reduced disclosures may be available in individual accounts for qualifying entities) FRS 102 (reduced disclosures may be available in individual accounts for qualifying entities) FRS 101 (may be available in individual accounts for qualifying entities) EU-adopted IFRS FRS 101 (may be available in individual accounts for qualifying entities) EU-adopted IFRS Effective date Date of transition 1 January 2015 Period commencing 1 January 2016 Period end 31 December

6 Early adoption rules FRS 105 Early adoption is permitted. Section 1A of FRS 102 Early adoption is permitted for accounting periods beginning on or after 1 January 2015 if changes to company law are applied from the same date - and vice versa. The new regime for small and micro entities REVISED SMALL COMPANIES REGIME Big changes for UK small companies regime Size limits Eligibility criteria Formats Disclosures Filing 6

7 Formats general principles 2 Balance sheet formats 2 P&L formats Ability to adapt provided: Information is equivalent to standard formats Format accords with GAAP Consistency of presentation required Formats abridged accounts Optional Balance sheet or P&L or both Unanimous approval of shareholders Approval for each year of abridgement Disclosure requirements Analysis of balance sheet headings unless use abridged balance sheet Restricted list of other disclosures Overriding requirement = true and fair view irrespective of: - Format - Abridgement - Limited mandatory disclosures 7

8 Introduction to FRS 102 section 1A SCOPE STRUCTURE CONTENT When does Section 1A apply? Small company or LLP under CA 2006 or would be if were a company AND Choose to apply Small Entities Regime Unless statutory framework does not permit Structure Section 1A: Form and content True and fair view Appendix A: Adapting balance sheet formats Appendix B: Adapting P&L formats Appendix C: Disclosure requirements Appendix D: Additional disclosure encouraged 8

9 A complete set of accounts under Section 1A FRS 102 Profit and loss account Other comprehensive income Balance sheet Cash flow statement Statement of changes in equity Notes to the accounts Section 1 A Profit and loss account Encouraged if other gains and losses Balance sheet Not required Encouraged if transactions with equity holders Restricted notes, subject to overriding requirement to give a true and fair view Appendix C: Disclosure requirements Minimum requirements Based on company law but use FRS 102 terminology Cross references to remainder of FRS 102 Compliance with FRS 102 disclosure generally = compliance with company law requirements Notes follow order of primary statements Minimum disclosures Accounting policies (information about judgements may be useful to users ) Fixed assets movements amortisation, depreciation, impairment Revaluation table and supporting information Fair value table and supporting information Indebtedness and security Guarantees and financial commitments Off balance sheet arrangements Exceptional items Average number of employees Post balance sheet events 9

10 Minimum disclosures Advances and credits granted to directors Material transactions with specified related parties Not under normal market conditions = MUST Under normal market conditions = MAY If a subsidiary, details of parent of smallest group drawing up group accounts Statutory information ABC Limited is a private company limited by shares. It is registered in England and Wales, registration number and its registered office is 123 Market Street, Anytown Section 1A: a balancing act True and fair view Restricted statutory disclosure Signposts to true and fair Section 1A 1A.6: may need to provide disclosures in addition 1A.16: present sufficient information in the notes 1A.17: encouraged to consider and provide disclosures in FRS 102 relevant to material items 10

11 Additional disclosure required? Factors to consider Additional disclosures linked to 1A.5 Gains/ losses not via P&L statement total comprehensive income Transactions with equity holders statement of changes in equity Abridged accounts linked to 1A.16 Disaggregating information on the balance sheet Disclosing turnover Materiality Usefulness to users Encouraged by Section 1A Appendix D Going concern Dividends Transitional impact The new regime for small and micro entities THE MICRO-ENTITIES REGIME Recap of the micro-entities regime Effective for accounting periods ending on or after 30 September 2013 Optional for qualifying companies Simple account formats Limited disclosures required at the foot of the balance sheet Accounts presumed to give a true and fair view Fair value and alternative accounting rules not permitted 11

12 FRS 105 The Financial Reporting Standard applicable to the Micro-Entities Regime Based on FRS 102 but amended for the legal requirements of the micro-entities regime and further simplified to reflect the smaller size and simpler nature of micro-entities. FRS 105 compared to the FRSSE Structure and terminology FRS 105 Language consistent with FRS 102 FRSSE (not amended for micros regime) Uses old UK GAAP language Includes company law requirements relating to financial statements only Includes all company law reporting requirements More guidance provided True and fair Presumed to give a true and fair view Disclosures Two disclosures required at foot of balance sheet Directors required to consider if financial statements are true and fair More disclosures required FRS 105 compared to the FRSSE (continued) Account formats FRS 105 Balance sheet and profit and loss account only FRSSE (applied by small entity) STRGL also required and cash flow encouraged Limited line items Revaluations No revaluations or subsequent measurement at fair value Accounting requirements No requirement to account for deferred tax More line items required Revaluations are permitted or required eg, investment properties Accounting for deferred tax required Accounting policy options None Some eg, capitalisation of development costs and/or finance costs 12

13 FRS 105 compared to Section 1A of FRS 102 Key similarities: Only balance sheet and profit and loss account required Guidance provided in the standard Not all company law reporting requirements included Consistent language FRS 105 compared to Section 1A of FRS 102 Key differences: Fewer disclosure requirements Less flexibility in account formats and language Presumed true and fair Simplified accounting requirements No accounting policy options Poll 1 For a micro-entity, which option do you think you or your clients will find most attractive under the new regime? 13

14 The new regime for small and micro entities PRACTICAL CONSIDERATIONS Early adopting FRS 105 restatement required Date of transition 1 October 2013 Period commencing 1 October 2014 Period end 30 September 2015 Adjustments on transition to FRS 105 Remove all revaluations Retrospective depreciation of investment property Choice over lease incentives Remove deferred tax Provide for holiday pay Recalculate reserves 14

15 Transition to FRS 105: investment property Investment property bought in 1995 for 120,000 of which 40,000 related to the land and 80,000 to the building. At September 2013 the property was valued at 650,000. The estimated useful life is 50 years. On transition to FRS 105, adjust as follows: Reverse revaluation (650, ,000) = 530,000 Dr Revaluation reserve, Cr Investment property Adjust for depreciation accumulated to date on cost of building 80,000/50 years x 18 years = 28,800 Dr Profit and Loss reserve, Cr Accumulated depreciation Should eligible companies adopt FRS 105? Case by case basis Simple or complex business? Business objectives lifestyle or growth? Is fair value important? Needs of users met by micro accounts? Is an audit required? Early adopting FRS 102 Section 1A Date of transition 1 January 2014 Period commencing 1 January 2015 Period end 31 December

16 Potential issues? FRS 102 impact? Commercial impact? New data required Dividends Choices on transition Bank and other contractual Preparing for the new regime Start now! Discuss with clients Transitional and comparative date Poll 2 Do you think you, or any of your clients, will choose to early adopt any of the following? 16

17 Any questions? Ask a question Participate in today s webinar send us a question Click here to see questions New UK GAAP resources /newukgaap 17

18 Financial reporting at your fingertips Download the faculty s free app for iphone, ipad and Android devices. Visit /frfapp for more information. You can also follow to keep up-to-date with the latest financial reporting developments and breaking faculty news 140 characters at a time. Questions Sarah Dunn Technical Manager, Financial Reporting Faculty, ICAEW Stephanie Henshaw Technical Standards Partner Francis Clark LLP Future events and webinars Events 21 October 2015 UK GAAP Conference: Implementation issues & challenges. More info at: /ukgaapconference November 2015 IFRS Conference 2015: Major changes on the horizon. More info at: /ifrsconference2015 Visit /frfevents for details of our upcoming events Webinars 20 October 2015 Transition to FRS 102 for FRSSE users Visit /webinars for details of our upcoming webinars Don t forget you can also access recordings of previous webinars 18

19 THANK YOU FOR ATTENDING Contact the Financial Reporting Faculty +44 (0) Please take the time to fill out our short survey A world leader of the accountancy and finance profession 19