Guide to FRS 102 & Relate Accounts Production

Transcription

1 Guide to FRS 102 & Relate Accounts Production UK ROI UK R008 April 2015

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3 CONTENTS Relate Accounts Production Guide to FRS Introduction... 8 Background... 8 The Future of FRS 102 and FRSSE... 9 Consistency of Disclosure with Laws and Regulations... 9 Scope of FRS The New Disclosure Language Reminders Transitions to FRS Statement of Compliance Basis of Preparation Details of Entity Period of Financial Statements Note Discounted Operations Statement of Changes in Equity Statement of Cash Flows Investment Properties Property, Plant and Equipment Fair Value Basis of Certain Financial Instruments Intangible Fixed Assets Deferred Tax Employment and Post-Employment Benefits Stock (Inventories) Finance Leasing Commitments Operating Leases Exemptions from Disclosure Requirements Accrued Income Re Government Grants Accounting Policies Share Ownership of the Company

4 Relate Accounts Production Going Concern Note on Sales Agreement for Major Disposal of Assets or of a Disposal Group Reduced Disclosure Summary Guide to FRS 102 in Relate Accounts Production Selection of FRS 102 or old FRSSE or new FRSSE Reporting Parameters Terminology used in FRS Transition to FRS Discontinued Operations Movement of Retained Profit on the Profit and Loss Account Statement of Cash Flows Cash and Cash Equivalents Statement of Changes in Equity Accounting Policies General Information Significant Accounting Judgements and Key Sources of Estimation Uncertainty Period of Financial Statements Going Concern Group Company Exemptions Claimed Prior Year Adjustments Sales Agreement Business Combinations Fair Value Gains and Losses Amortisation of Basic Financial Instruments using Effective Rate of Return Impairment of Short-Term Debtors and Creditors User-Defined Intangible Fixed Asset Property, Plant and Equipment

5 Relate Accounts Production Plant and Machinery Investment Property Leasing Deferred Tax Defined Benefit Pension Scheme Derivatives Hedging Financial Instruments Company Share Ownership Removal of Disclosure Requirements Off-Balance Sheet Arrangements Other Non-FRS 102 Enhancements to the Company Template Database Validation Introduction of Industrial AND Provident Society Acts Accounting (ROI) Introduction of Micro-Entity Financial Statements (UK/NI) Foreign Currency Exchange Differences in Intangible/Tangible Fixed Assets Extension of the Number of Directors Names up to Introduction of Subordinated Loan Reserve Changes to the Strategic Report (UK/NI) Statutory Auditor Signatory on Abridged Accounts (ROI) User-Defined Areas in the Directors Report User-Defined Notes Sample Set of FRS 102 Accounts

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7 Guide to FRS 102

8 Relate Accounts Production INTRODUCTION 2015 has brought along some of the biggest compliance headaches experienced by accountants for many years. For financial statements with years starting on or after 1st January 2015, FRS 102 became Mandatory and in respect of statements with the year ending 31st December 2015, the years ending 31st December 2013 and 2014 should provide the transitional adjustments and plans and programs need to be in place to handle this new accounting regime. The old FRSSE and the new FRSSE (January 2015) for small entities will be disbanded, so small entities that are not micro-entities will be obliged to follow FRS 102 for years starting on or after 1st January 2016 albeit on a reduced scale. Other entities (medium and large) will need to follow FRS 102 in full for years starting on or after 1st January 2015 and there are likely to be an increasing number of changes to it as it becomes mandatory and thereafter as well. There will soon be legislation for micro-entities as well which must follow the FRSME. BACKGROUND It has been some 40 years since the last major change to the accounting regime. In March 2013 the Financial Reporting Council published FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland that is designed to replace all the existing standards (FRSs, SSAPs and UITF Abstracts) for those entities to which it applies. It is based on the international standard, IFRS for SMEs. However, it has been considerably modified so that it is compatible with ROI and UK legislation and regulations and with matters where there is disagreement with the international standard and where our existing standards are more advanced. FRS 102 (unlike IFRS for SMEs) is mandatory for non-micro-entities that are private entities. The transition date for periods starting on 1st January 2015, however, is 1st January 2014, because the financial statements for the previous two periods have to be restated in accordance with FRS 102 in the financial statements of periods starting on or after 1st January Also, small private entities may optionally follow FRS 102 for Furthermore, private entities of any size may optionally follow FRS 102 for earlier periods as far back as periods ending 31st December Small private entities under old GAAP may optionally adopt the FRSSE (effective April 2008)). Such entities may instead adopt the new FRSSE (effective January 2015) for periods starting before 1st January If such entities do not follow FRS 102 for periods starting on or after 1st January 2015, then they must adopt the new FRSSE for those periods. However, unless they are microentities, they must follow FRS 102 in Relate Accounts Production deals with the full old GAAP, the old FRSSE, FRS 102, the new FRSSE and micro-entities according to these rules within a single template for each relevant entity type. So a user does not have to set up a new dataset each time an entity changes from one accounting regime to another. The ticked boxes in the table below show the options that are available depending on the size of the entity and year-start date. 8

9 Relate Accounts Production SIZE OF PRIVATE ENTITY YEAR-START 1ST JAN 2015 OLD GAAP FRSSE (APR 2008) FRS 102 FRSSE (JAN 2015) Small Before r r r r Small On/after r r Non-Small Before r r Non-Small On/after r All the above options are built into Relate Accountants Production. THE FUTURE OF FRS 102 AND FRSSE FRS 102 and the FRSSE represent the old and new GAAP respectively. The FRSSE being a reduced version of the old GAAP will always have fundamental differences with the new GAAP, unless it is completely overhauled. Because of the differences and the on-going transitional difficulties for a small entity growing to a medium or large one, it might be better to rewrite the FRSSE, so that it becomes a reduced version of FRS 102. This will happen soon. This would, of course, mean that all existing small entities would have to make the transition, but new ones would go straight to it. All small entities would then find it easier to go to the full FRS 102 when they have to. For the time being, however, each small but growing entity has to make a major transition. CONSISTENCY OF DISCLOSURE WITH LAWS AND REGULATIONS Laws and regulations always take precedence and therefore disclosures must be consistent with both laws and regulations and with the new standard whose purpose is still to make the full financial statements true and fair. The new Companies Act will soon be published and will indicate whether FRS 102 applies to entities such as Companies Limited by Guarantee on the basis of their size or not. The format of the Profit and Loss Account and the Balance Sheet remain essentially unchanged. When FRS 102 was still in draft mode, the ASB restructured the Balance Sheet, but subsequent changes to the standard removed the differences and indicated that the laws and regulations should be followed on these primary statements. There is, however, room for a little variation. To start with the terminology can be changed to be consistent with the standard, but it must also be consistent with law and regulations and not misleading. The example that is shown here includes some change in the terminology such as Noncurrent assets in place of Fixed assets, but all such terminology changes are options within the template. Another possible change on the face of the Balance Sheet is to disclose separately Investment Property. The accounting treatment of Investment Property is very different from other fixed assets and separate disclosure with a separate note may arguably be better practice. Once again we have given the option for separate disclosure within the template. 9

10 Relate Accounts Production SCOPE OF FRS 102 The size of FRS 102 is only about one tenth of the size of all the existing standards and abstracts it is replacing. Therefore, in principle, it is much easier to grasp the essentials. However, the reason why the existing standards were extended so much was to deal with all the unanswered detailed queries that arose after the issue of those standards. There could also be a lot of grey areas arising in FRS 102 as well. So FREDs are being developed which will improve the detail. It would not be surprising to see this standard gradually increasing in size. Also, changes to IFRS for SMEs and to regulations and EC directives could also mean new versions of the standard will eventually appear. Because this standard has brought together the previous standards into a reduced single standard does not mean that this will remain so. The advent of FRS 102 has also meant that existing SORPs are being rewritten to deal with the standard in so far as it applies to specific entity types. Relate Accounts Production will of course deal with these changes insofar as they are of significance to our clients. THE NEW DISCLOSURE LANGUAGE These options are available to enable selection of the most suitable terminology: A There are options to decide on whether to adopt the new terminology for the headings of the primary financial statements (subject to company law); the changes may be adopted individually or collectively; there are also options for the terminology of combinations of statements with corresponding text in the accounting policies. Profit and Loss Account Statement of Total Recognised Gains and Losses Balance Sheet Reconciliation of Shareholders Funds Cash Flow Statement Income Statement Other Comprehensive Income within Statement of Changes in Equity Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows B There are options for other descriptive changes such as: Tangible assets Fixed assets Debtors Stock Creditors Minority interests Capital and reserves Turnover Net realisable value Interest payable and similar charges Interest receivable and similar income Net book value Property, plant and equipment Non-current assets Receivables Inventories Payables Non-controlling interests Equity Revenue Estimated selling price less costs to sell Finance costs Finance income/investment income Carrying amounts 10

11 Relate Accounts Production Post-balance sheet events Profit & Loss Reserves Events after end of reporting period Retained Earnings Of course there are other general changes to the language. Acquisitions becomes Business combinations. The standard has also introduced Cash equivalents, Cash generating unit, Income tax (in place of Corporation tax ), Operating segments etc. REMINDERS In order to help our clients get used to the disclosure requirements of the new standard, there are reminders built into the Compliance Database of the types of entry that are required. For example, for Investment Property there is a reminder of the requirements to disclose as relevant an explanation of how a fair value was determined, any security pledged and any undeveloped land not at fair value. Another example is the list of possible exemptions that may be claimed by group companies. 11

12 Relate Accounts Production TRANSITIONS TO FRS 102 When a company changes from one regime to another (whether required and optionally), there is no need to create a new set of data. This in turn enables the FRS 102 transition facility to operate. This is a built-in facility enabling the transitional adjustments to the opening and closing comparative Balance Sheets and to the comparative Profit and Loss Account to be reported as required by the standard. All that is required is that these adjustments are posted using this special routine instead of the standard one. In Relate Accounts Production the transitional adjustments are entered in two trial balance columns, one for the comparative year and one for the pre-comparative year. The amounts are automatically included in the comparatives and pre-comparatives and reported separately in the notes on the FRS 102 transition. Companies with year-end 31st December 2015 the adjustments would be to the Balance Sheet of the financial statements with the year-end of 31st December 2013, the Balance Sheet of the financial statements with the year-end of 31st December 2014 and the Profit and Loss Account of the financial statements with the year-end of 31st December It is advisable to determine what those adjustments are when those two previous years of financial statements are produced. Any early adoption will bring those dates forward. Using Relate Accounts Production you can produce new versions of the financial statements for those two previous years, but of course you are not required to file them. When the time comes to prepare the first financial statements under FRS 102, you can easily identify the transitional adjustments that need to be made. Using Relate Accounts Production it is simple to achieve using the following approach: 1. The year-end routine on the previous set of accounts that was filed (i.e. not an FRS 102 version of it) may be run or the trial balance extracted from the client s books in the usual way. 2. Then post the FRS 102 adjusting transactions through to the pre-comparatives and comparatives using the special FRS 102 transactional adjustments facility and making sure that the brought forward adjustments in the comparative agree with the adjustments being carried forward from the pre-comparatives. 3. Then do an ordinary journal to adjust the opening balances in the current year to the adjusted closing balances in the comparative year. There is a facility for automatically checking that brought forward amounts in a particular year agree with carried forward amounts from the preceding year. This will speed the process up. There is the means to reference each of the transitional adjustments to detailed text that explains how the transitional changes came about, such as these changes in accounting policies: Restatement of goodwill values to accord with the five-year useful economic life presumption Stock values to recognise the prohibition of valuation under LIFO Deferred tax implications The text may have multiple references where the transitional adjustments caused multiple changes to the reported balances. 12

13 Relate Accounts Production STATEMENT OF COMPLIANCE The standard requires all financial statements to include a statement of compliance. This statement should appear immediately after the primary statements. A normal statement for UK financial statements would typically be as follows: The financial statements of the company for the year ended 31 December 2013 have been prepared in accordance with generally accepted accounting principles in the United Kingdom and UK statute comprising the Companies Act 2006 and in accordance with the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland (FRS 102) issued by the Financial Reporting Council, as promulgated by the Institute of Chartered Accountants in England And Wales. These are the company s first set of financial statements prepared in accordance with FRS 102 (see note x for an explanation of the transition). The last sentence is required the first time FRS 102 compliant financial statements are produced and will appear automatically. Also the means is given to report additional disclosures if there is a departure from FRS 102 as required by the standard. BASIS OF PREPARATION The basis of preparation discloses the valuation methods used and refer to the accounting policies: The financial statements have been prepared under the historical cost convention except for certain properties and financial instruments that are measured at re-valued amounts or fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the company s financial statements. If the financial statements have not been prepared on a going concern basis, then the basis of preparation will include: As explained in note x, the directors do not consider the going concern basis to be appropriate and these financial statements have therefore not been prepared on that basis. DETAILS OF ENTITY The first note comprises a statement on the legal form of entity and the country of incorporation. PERIOD OF FINANCIAL STATEMENTS NOTE If the current period is not a year, there is the means to disclose: The length of the period The reason for the longer or shorter period The fact that the comparative amounts presented in the financial statements and its notes are not entirely comparable 13

14 Relate Accounts Production DISCOUNTED OPERATIONS Where there are discontinued operations, the Profit and Loss Account shows in columnar form the split between continuing and discontinued operations with totals for both years. The format is in accordance with the illustration in FRS 102, but also conforms to company law. The example below produced using Relate Accounts Production shows discontinued operations in both the current and comparative years. GATSBY ANTIQUES LIMITED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2013 Notes Continuing Operations 2013 Discounted Operations Total Continuing operations as restated 2012 Discounted operations as restated Total Turnover 5 53,496,448 1,346,789 54,843,237 50,068, ,125 50,822,362 Cost of sales (51,662,296) (1,067,564) (52,729,860) (48,036,542) (598,543) (48,635,085) Gross profit 1,834, ,225 2,113,377 2,031, ,582 2,187,277 Distribution costs (162,644) (43,679) (206,323) (184,015) (27,531) (211,546) Administrative expenses (1,716,736) (415,765) (2,132,501) (1,702,386) (217,565) (1,919,951) Other operating income 780,663 13, , ,021 7, ,548 Operating profit 6 735,435 (166,566) 568, ,315 (81,987) 510,328 Investment income 7 12, ,410 3,528-3,528 Other gains and losses 8 4,596-4, Interest receivable and similar income 9 10, ,060 3,398-3,398 Interest payable and similar charges 10 (30,508) (623) (31,131) (42,966) (317) (43,283) Profit on ordinary activities before taxation ,524 (166,720) 565, ,275 (82,304) 473,971 Tax on profit on ordinary activities (116,011) (2,145) (118,156) (90,362) (1,235) (91,597) Profit of the year 616,513 (168,865) 447, ,913 (83,539) 382,374 14

15 Relate Accounts Production STATEMENT OF CHANGES IN EQUITY This is now a primary statement showing the movements over both the comparative and current years by class of equity (share capital, all other reserves and, in the case of consolidated financial statements, non-controlling interests). It replaces the Reconciliation of Shareholders Funds and Reserves notes, but also shows the changes in the comparative year and includes a disclosure of Other Comprehensive Income which replaces the Statement of Total Recognised Gains and Losses. The Consolidated Statement of Changes in Equity includes the split between amounts of equity that are attributable to the owners of the parent company and to non-controlling minority interests. The brought forward amounts are shown as restated according to the prior year material errors and changed accounting policies. Note that there is now material errors and not fundamental errors and so there are likely to more of them than previously. The prior year adjustment amount is split between the material errors and the changed accounting policies by an entry in the Compliance Database and these adjustments can be explained in the Prior Year Adjustment note. All the movements during each of the two years are itemised across each category of equity. This statement is automatically produced and a note is available that should explain the changes that have taken place. If the only movement in equity is due to profit/loss, dividends paid and prior year material errors and changed accounting policies, then it may be optionally combined with the Income Statement to produce the Statement of Income and Retained Earnings. In company law terms the Profit and Loss Account is extended to show the movement in the Profit and Loss Reserve. The amounts of profit/loss, dividends paid, prior year material errors and changed accounting policies are shown separately. An accounting policy that this option has been chosen is disclosed. STATEMENT OF CASH FLOWS Small companies that follow FRS 102 must produce this statement as well as other companies. The main change is there are now only 3 classifications compared with 9 under FRS1 (Revised): Operating activities Investing activities (except cash equivalents) Financing activities Relate Accounts Production produces the statement in a single form without the need for notes. It uses the indirect method like most statements based on old GAAP. It starts with the profit and then adjusts for items below the operating profit line and then for non-cash items with the movements in working capital shown separately. The cash items are then added back. This results in the cash from operating activities. It is followed by the cash and cash equivalents from investing and financing activities. The total movement is added to the brought forward cash and their cash equivalents. Some cash items may be apply to multiple classifications. 15

16 Relate Accounts Production Relate Accounts Production provides the option to split postings across these classifications: Interest received Interest paid Dividends received Dividends paid (only Operating Activities and Financing Activities) Tax paid Tax repaid Unlike FRS 1 (Revised) the statement shows the movement of both cash and cash equivalents. There is also a note reconciling the cash and cash equivalents in the Balance Sheet (Statement of Financial Position) with that in the Statement of Cash Flows. You can enter any reconciling enter any reconciling entries of amounts such as Cash and bank balances included in a disposal group for resale. The note also must include an explanation of any lack of availability of cash and cash equivalents and other matters (because of foreign exchange controls, legal restrictions etc.). The means to make such entries is provided. INVESTMENT PROPERTIES Where it is possible, changes due to fair value accounting are reported in the Profit and Loss Account (Income Statement) with a note reporting Net gain (loss) arising on changes in fair value of investment property. Deferred tax is recognised on these gains and losses and posted to the profit or loss. On transition, the investment property revaluation reserve balance must be transferred to the profit and loss reserve. Note that any gain is not realised and therefore not distributable as a dividend. Because such gains are now shown in the Profit and Loss Account, it is no longer easy to determine what is distributable and what isn t. Therefore some firms may wish to split the Profit and Loss Reserve into two reserves: one distributable, the other not. It is perfectly easy to do this using Relate Accounts Production. Investment property has its own note, because, when there is fair value uplift in investment property, additional disclosures may be required: Disclosures relating to the fair value of the investment property The security pledged for the investment property (in respect of loan to buy land) The fact that the undeveloped land has not been valued at fair value (because it would involve undue cost or effort) If fair value cannot be measured reliably without undue cost or effort, the cost less depreciation/ impairment model must be used. This facility is also included. 16

17 Relate Accounts Production PROPERTY, PLANT AND EQUIPMENT It is optional whether Property, Plant and Equipment is re-valued. If it is, it can still be carried at fair value and any fair value gain can be reported in equity and reported via Other Comprehensive Income (STRGL). However, fair value gains on such property can be taken directly to profit and loss to the extent that it reverses a revaluation decrease of the asset which was previously recognised in profit or loss. Both options are available in Relate Accounts Production. FAIR VALUE BASIS OF CERTAIN FINANCIAL INSTRUMENTS Certain financial instruments (referred to as Other ) may be valued on a fair value basis by posting the change to profit or loss. There are two classes of financial instruments: Basic For example, the following are mostly measured at amortised cost: Trade debtors Trade creditors Simple bank loans Other For example, the following are mostly measured at fair value with movements recognised in profit or loss: Complex loan agreements (such as where interest rates are linked to commodity prices or equity prices) Investment in shares (subsidiaries), if can be measured reliably Long term inter-company loans (provided no interest applies), the difference arising if the loan is for a fixed term and not a commercial rate Derivatives (such as foreign exchange forward contracts, interest rate swaps and cross currency swaps which require associated debtors and creditors retranslated at the year-end rate) - this is the first time derivatives have to be reported in the Balance Sheet and the necessary derivative assets and liabilities are provided in Relate Accounts Production Hedge accounting (in specific circumstances only, but FRS 102 may be changed when the simplification of the IFRS9 version is published) The means to add fair value movements for Other financial instruments has been provided in the profit or loss. There are other user-defined Other financial instruments as well. 17

18 Relate Accounts Production INTANGIBLE FIXED ASSETS Software and various categories of intangibles that were part of goodwill on acquisitions (Business Combinations) are now treated as separate intangible assets if they can be separately identifiable at fair value. Examples include: Operating licences Customer contracts Databases Domain names Software So Relate Accounts Production provides additional classes of intangible fixed assets to enable separate disclosure. DEFERRED TAX There are more occurrences where deferred tax must be accounted for, such as: Deferred tax on timing differences re business combinations adjusted against goodwill initially on acquisition (not profit or loss) Deferred tax on timing differences arising from revaluing non-monetary assets (such as investment property and property, plant and equipment) revaluations, whether to be sold or not Note that this requirement is different from IFRS for SMEs which requires temporary differences as opposed to timing differences. Note also that discounting long-term deferred tax liabilities is no longer permitted. EMPLOYMENT AND POST-EMPLOYMENT BENEFITS There is now a requirement to accrue short-term benefits including: Wages, salaries and employer s PRSI Paid annual leave and paid sick leave (when the absences are expected to occur within 12 months after the reporting period in which the employees render the related employee service) Profit-sharing and bonuses (payable within 12 months after the reporting period in which the employees render the related service) Non-monetary benefits such as medical care, housing, cars and free/subsidised goods or services for current employees There are changes to the disclosure of defined benefit schemes: Current service cost and net interest on net scheme assets/liabilities are recognised in profit or loss (as opposed to current service cost, interest cost on scheme liabilities and expected return on plan assets). 18

19 Relate Accounts Production Re-measurement of net defined benefit scheme assets and liabilities (as opposed to actuarial gains and losses) are recognised in other comprehensive income as disclosed in the Statement of Changes in Equity and the Statement of Comprehensive Income, if utilised. For Group defined benefit pension plans the defined benefit surplus or deficit is now recognised also on at least one of the individual company Balance Sheets. All the required entries may be made in the Relate Accounts Production. STOCK (INVENTORIES) The following disclosures are included: The accounting policies adopted in measuring stock, including the cost formula normally first-in, first-out (FIFO) or weighted average cost (LIFO not being allowed anymore) The net book value (carrying amount) of stock and the net book value in classifications appropriate to the entity The amount of inventories recognised as an expense during the period The impairment losses recognised or reversed in profit or loss The net book value of stock pledged as security for liabilities FINANCE LEASING COMMITMENTS Net Book Value (Carrying Amount), but no longer Depreciation, is disclosed. Future minimum lease payments disclosed for: Under 1 year 1 to 5 years Over 5 years A general description must be disclosed of the lessee s significant leasing arrangements such as: Information about contingent rent Renewal or purchase options and escalation clauses Subleases Restrictions imposed by lease arrangements. OPERATING LEASES Now non-cancellable operating leases that require disclosure of future minimum lease payments: Under 1 year 1 to 5 years Over 5 years Lease payments recognised as an expense for all operating leases are to be disclosed. 19

20 Relate Accounts Production EXEMPTIONS FROM DISCLOSURE REQUIREMENTS If a company within a group takes advantage of FRS 102 exemptions, then a note must disclose which of the six exemptions are adopted and the name of the parent of the group in whose consolidated financial statements its financial statements are consolidated and from where those financial statements may be obtained. Shareholders must be notified and not object. The exemptions are: Number of shares outstanding at start and end of current period Statement of Cash Flows Disclosure of non-basic (other) financial instruments and those stated at fair value Hedge accounting Share options and information on management and modification re share-based payments Management personnel compensation total re Related Party Disclosures If a group company selects the Statement of Cash Flows to be exempted, it will not be produced. ACCRUED INCOME RE GOVERNMENT GRANTS There must be an accounting policy for Government Grants. The note must detail the nature and amounts recognised in the financial statements, unfulfilled conditions and other contingencies attaching to grants that have been recognised in income. There must also be an indication of other forms of government assistance from which the entity has directly benefited. If the Performance Model is used, that is recognition of grant income when performance-related conditions have been met, then those details must be disclosed. ACCOUNTING POLICIES A range of new or modified accounting policies include: The methods for reporting associates and joint ventures in consolidated financial statements (equity method or fair value model or, for investors that are not parent companies, cost model) Whether development costs are capitalised or not Statement of compliance (as referred to above) including reference to the transition, whether this is the first set of financial statements prepared in accordance with FRS 102 and details of any departure from compliance with FRS 102 Policies adopted in measuring stock, including the cost formula used (FIFO policy) The decision to show the retained earnings on the Profit and Loss Account instead of the Statement of Changes in Equity Government grants specifying whether the performance or accrual model is applied 20

21 Relate Accounts Production SHARE OWNERSHIP OF THE COMPANY The share capital note includes information on the shares owned by: The company itself Subsidiaries Associates Joint ventures GOING CONCERN If the going concern basis is not appropriate, a statement must be made under Directors Responsibilities such as: As explained in note x, the directors do not consider the going concern basis to be appropriate and these financial statements have therefore not been prepared on that basis. The option to make such an entry in the Directors Responsibility page and to select the break-up basis for the Basis of Preparation policy is available. NOTE ON SALES AGREEMENT FOR MAJOR DISPOSAL OF ASSETS OR OF A DISPOSAL GROUP More classes of Intangible Assets acquired in a Business Combination are now recognised separately from Goodwill and these are provided as referred to above. Goodwill must have a finite life (not more than 5 years if uncertain) except previous goodwill prior to date of transition, which need not be changed. A change in the controlling interest in subsidiaries (provided it doesn t lead to loss of control) is treated as a transaction with equity holders with no impact on profit or loss. The change can be implemented in Relate Accounts Production. Note that merger accounting is not permitted (but is required for Business Combinations involving Public Benefit Entities). REDUCED DISCLOSURE There is now no need to have: A statement on the Profit and Loss Account that there are no recognised gains and losses A statement on the Profit and Loss Account that there are only continuing operations A comparison with historic cost at foot of Statement of Comprehensive Income Reconciliation of Shareholders Funds note and Reserves note as the Statement of Changes in Equity covers them 21

22 Relate Accounts Production SUMMARY These are the important areas of disclosure that entities that will follow FRS 102 will be required to do and are included within the Relate Accounts Production templates. This document is not intended as a definitive account of all FRS 102 s requirements, but is useful as a reminder of the key points. The example set of financial statements produced directly from Relate Accounts Production shows many, but not all, of the required disclosures under the standard. It also shows a few example changes of terminology per the new standard, but these changes are optional in Relate Accounts Production. The only requirement of the standard is that there is no resulting confusion. The terminology used in the company law formats can still be used (as in the example) and even that of the old GAAP, but many may decide that the new terminology is more appropriate. As time passes, interpretations of the standard may change a little and so will the standard itself. Relate Software will monitor all such developments and make the necessary changes in a timely manner. In the meantime the use of Relate Accounts Software to deal with the transitional issues will help immensely and ensure that the take-up of the standard goes smoothly. 22

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25 Guide to FRS 102 in Relate Accounts Production

26 Relate Accounts Production INTRODUCTION Relate Accounts Production takes the hassle out of your transition to FRS 102. This document will further explain and reduce any concerns you may have about the changing compliance and highlight how Relate Accounts Production eases the transition to FRS 102. SELECTION OF FRS 102 OR OLD FRSSE OR NEW FRSSE SIZE OF PRIVATE ENTITY YEAR-START 1ST JAN 2015 OLD GAAP FRSSE (APR 2008) FRS 102 FRSSE (JAN 2015) Small Before r r r r Small On/after r r Non-Small Before r r Non-Small On/after r Small non-micro Entities Year-Start 1st Jan 2016 r Reduced The current options are shown in the diagram above. The selection of the appropriate standard may be made in the Compliance Database under Reporting Parameters / Accounting Options. If none of FRS 102, FRSSE (effective 2015) or FRSSE (effective 2008) is chosen, then old GAAP will apply. When the year-start is on or after 1st January 2015, then old GAAP will not apply. Assuming the FRSSEs are withdrawn in the future and a reduced version of FRS 102 applies to small entities, we will update the compliance accordingly. For year-starts from 1st Jan 2016 the FRSME will apply to Micro-Entities, while the old and new FRSSEs are planned to be discontinued. Small companies (that are not Micro-Entities) will be required to apply FRS 102, albeit in a reduced state. REPORTING PARAMETERS Because of the large number of reporting parameters, these have now been split into the following: Presentation Accounting Options Disclosure Books and Records (ROI only) TERMINOLOGY USED IN FRS 102 In the Compliance Database under Reporting Parameters / Presentation there are options to select the terminology required. By selecting Use all the FRS 102 descriptions for the headings of the primary statements you do not have to select them individually. Alternatively, there are also separate options for each primary statement. Following those items there are options to select a range of textual terminology. 26

27 Relate Accounts Production TRANSITION TO FRS 102 Under Nominal Ledger there is a button called FRS 102 Trans. Where there are changes to the comparatives and pre-comparatives as a result of the transition, they may be entered in the last two columns. The first of those columns is the comparatives and the second the precomparatives. The amounts are automatically included in the comparatives and pre- comparatives and reported in the notes as the FRS 102 transition. For a company with year-end 31st December 2015 the adjustments would be to the Balance Sheet of the financial statements with the year-end of 31st December 2013, the Balance Sheet of the financial statements with the year-end of 31st December 2014 and the Profit and Loss Account of the financial statements with the year-end of 31st December It is therefore advisable to determine what those adjustments are when those two previous years of financial statements are produced. Any early adoption will bring those dates forward. Using Relate Accounts Production you can produce new versions of the financial statements for those two previous years, but of course you are not required to file them. When you prepare the first financial statements under FRS 102, you can then easily identify the transitional adjustments that need to be made. Using Relate Accounts Production it is simple to achieve using the following approach: 1. The year-end routine on the previous set of accounts that was filed (i.e. not an FRS 102 version of it) may be run or the trial balance extracted from the client s books. 2. Then post the FRS 102 adjusting transactions to the pre-comparatives and comparatives using the special FRS 102 transactional adjustments facility and making sure that every brought forward adjujstment in the comparative agree with the adjustments being carried forward from the pre-comparatives. 3. Then do an ordinary journal to adjust the opening balances in the current year to the adjusted closing balances in the comparative year. There is a facility for automatically checking that brought forward amounts in a particular year agree with carried forward amounts from the preceding year. Using it will be effective. There is the means to reference each of the transitional adjustments to detailed text that explains how the transitional changes came about, such as these changes in accounting policies: Restatement of goodwill values to accord with the five-year useful economic life presumption Stock values to recognise the prohibition of valuation under LIFO Deferred tax implications Accruals re holiday pay, wages and salary, profit sharing and bonuses and non-monetary benefits (now a requirement) Uplift in freehold property depreciation The text may have multiple references where the transitional adjustments caused multiple changes to the reported balances. In the Compliance Database go to Transition to FRS 102 / Explanatory Text on Transition and enter the references and the corresponding text using those references. 27

28 Relate Accounts Production DISCONTINUED OPERATIONS Entries are made in the Compliance Database under Profit and Loss / Discontinued Operations. The presentation follows the example in the FRS 102, but follows company law. MOVEMENT OF RETAINED PROFIT ON THE PROFIT AND LOSS ACCOUNT If the only changes to equity during the current and comparative years arise from profit or loss, payment of dividends, corrections of prior period material errors and changes in accounting policy, then these items may be disclosed at the foot of the Profit and Loss Account instead of producing the primary Statement of Changes in Equity. Go to the Compliance Database under Reporting Parameters / Disclosure. STATEMENT OF CASH FLOWS This is a new primary statement where the classification of the movement of cash is based only on three categories: 1. Operating activities 2. Investing activities 3. Financing activities The format of the statement is done using the indirect method. The Compliance Database enables Interest, Dividends and Tax to be allocated across those categories according to their nature, rather than splitting those items in the nominal ledger. To access those entries go to Statement of Cash Flow / Activity Categories re Interest, Dividends and Tax. Enter the amounts with the appropriate sign for posting to those items. So, if a paid item, enter as a positive amount; if a received item, enter as a negative amount. The system will automatically reduce the amount posted to the default category by that amount and add to it the selected category. There is also a reconciliation of cash and cash equivalents from the totals in the Statement of Cash Flows to amounts reported in the Balance Sheet, which is reported in a note. Normally, the reconciliation will work automatically, but if there is a difference a reconciling item may be entered in the Compliance Database under Statement of Cash Flows / Reconciliation. A detailed description of the entered item is required, such as Cash and bank balances included in a disposal group held for resale. There may also be a significant amount of cash and cash equivalents not available for use by the company, for instance, because of foreign exchange controls. If such a thing occurs, an entry must be made in the Compliance Database under Statement of Cash Flows / Availability of Cash and Cash Equivalents. There is also a new Statement of Cash Flow Proof that appears on the Produce Accounts screen and may be used to help find incorrect postings. 28

29 Relate Accounts Production CASH AND CASH EQUIVALENTS FRS 102 indicates that Cash Equivalents are basically those items that can be realised as cash with 3 months. The existing Current Asset Investments using code 761 to are now reclassified as Cash Equivalents. Use other codes if they fall outside the definition of Cash Equivalents. Also the Bank Deposits using codes 777 to are treated as Cash Equivalents. If there are Bank Deposits that are not Cash Equivalents, set them up as investments. Bank Overdrafts using codes 801 to 802 are treated as Cash and Cash Equivalents. If any such Bank Overdraft is contractually not to be treated as such, set it up as short-term bank loan. STATEMENT OF CHANGES IN EQUITY This is a new primary statement. It replaces the Reconciliation of Shareholders Funds and the Reserves notes. It includes the Share Capital and so discloses the complete analysis of all the Capital and Reserves (or Equity). Unlike the old GAAP it is now required to show movements in the comparative year as well as the current year. The statement is not produced when the conditions referred to in paragraph 6 are met and the movement in retained earnings is selected for the Profit and Loss Account. Text can be used in a note to the financial statements to help explain the movements in equity. Do this by going to by going to Statement of Changes in Equity /Note on Changes in Equity in the Compliance Database. This note will also show the required analysis of Other Comprehensive Income (Statement of Total Recognised Gains and Losses) as shown by total in the Statement of Changes in Equity. ACCOUNTING POLICIES All the accounting policies are now amendable, because there are many options in each policy. There are many new ones that have been introduced: 1. Statement of Compliance with FRS 102 (separate ones for the ROI and UK/NI) can enter any departure from such compliance 2. Changes in Equity (decision to disclose change in Retained Earnings per paragraph 6) 3. Employee Benefits 4. Dividends policy 5. Operating and Finances Leases (in same section as Fixed Assets Depreciation) 6. Government Grants (specify Performance or Accruals model indicating where fair value of assets used 7. Investment Properties (revaluation, depreciation and fair value policies) 8. Under Trade and Other Debtors (initial recognition at fair value and thereafter stated at amortised cost using the effective interest method (if material) less impairment losses for bad and doubtful debts) 9. Trade and Other Creditors (initial recognition at fair value and thereafter stated at amortised cost using the effective interest method (if material) 29

30 Relate Accounts Production 10. Cash and Cash Equivalents (description of what they comprise and disclosure) 11. Borrowing Costs (writing off or capitalising; if capitalised, disclosure of amount capitalised and rate used) 12. Provisions Policy (when recognised and how measured) 13. Related Parties (definition of what constitutes such parties and their potential influence 14. Derivatives 15. Hedging (fair value hedge policy, cash flow hedge policy and hedge of net investment of foreign operation policy) 16. Associates (re Group Accounts) 17. Joint Ventures (re Group Accounts) There are now also 4 user-defined policies. An ixbrl list of all policies is available in the Compliance Database under Accounting Policies / User-Defined Policies). Default text exists for policies where appropriate to reduce the time taken to make entries. GENERAL INFORMATION The type of company and its country of incorporation are required to be entered. It is entered in the Compliance Database under Other Note Information / General Information. Reporting currency, activities etc. may also be entered. SIGNIFICANT ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Management is required to make judgements, estimates and assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. The basis for these needs explaining, the periodicity of reviews disclosed and the key sources of estimation uncertainty identified. Entries are made in the Compliance Database under Other Note Information / Significant Accounting Judgements and Key Sources of Estimation Uncertainty. PERIOD OF FINANCIAL STATEMENTS Entries need to be made on the reason for the longer or shorter period (if applicable) and the incomparability of comparative amounts. Entries are made in the Compliance Database under Other Note Information / Period of Financial Statements. GOING CONCERN If there is material uncertainty about the company s ability to continue as a going concern, in the Compliance Database under Reporting Parameters / Disclosure tick the box about not being a going concern and then enter text under the following as appropriate: Directors Report / Directors Responsibilities Auditors Report / Emphasis of Matter Other Note Information / Going Concern 30

31 Relate Accounts Production GROUP COMPANY EXEMPTIONS CLAIMED If group company exemptions are claimed, then entries need to be made in the Compliance Database under Other Note Information / Group Company Exemptions. The possible exemptions that can be claimed are listed and are: Number of shares outstanding at start and end of current period Statement of Cash Flows Disclosure of non-basic (other) financial instruments and those stated at fair value Hedge accounting Share options and information on management and modification re share-based payments Management personnel compensation total re related party disclosures Text also needs to be entered on claims notification and the fact that no shareholders expressed objections, the parent company which has consolidated financial statements and where those statements can be obtained from. PRIOR YEAR ADJUSTMENTS Material Error Under FRS 102 prior year adjustments arise when there are material (not fundamental) errors in the prior years. As with old GAAP the resulting adjustments to the Retained Earnings (P/L Reserve) in the current year are posted to code It is a requirement of FRS 102 that the prior year adjustments due to material error and those due to changes in accounting policy are shown separately in the Statement of Changes in Equity (or in the P/L Account if the requirements in note 6 are applicable). Change in Accounting Policies Changes in accounting policies can lead to prior year adjustments in order to make the years comparable. That part of the prior year adjustments that was due to changes in accounting policies may be entered in the Compliance Database under Other Note Information / Prior Year Adjustments. The amount entered will be subtracted from the amount posted to in order to separate them for disclosure purposes. The text in relation to the change in accounting policies is entered in the Compliance Database under Other Note Information / Change in Accounting Policies. SALES AGREEMENT Where there is a binding agreement to sell assets or a group of assets and associated liabilities, a description of the assets or disposal group, the associated facts and circumstances and the carrying amounts of the assets and liabilities must be disclosed. To do this, enter the required text in the Compliance Database under Other Note Information / Sales Agreement. 31

32 Relate Accounts Production BUSINESS COMBINATIONS If there are Business Combinations (acquisitions), entries are required. Where such acquisitions occur it is important that the various classes of intangible assets are recognised separately from Goodwill and each class amortised. User-definable nominal codes are in the range 616:618.02, 608: and 614: The Patents description may also be changed in the Compliance Database. This is an addition to Goodwill and Development Costs. Typical examples of such classes are: Operating licences Customer contracts Databases Domain names Software Goodwill itself must have finite life (not more than 5 years if uncertain) except previous goodwill prior to date of transition. A change in the controlling interest of subsidiaries (provided it doesn t lead to loss of control) is treated as transactions with equity holders, with no impact on profit or loss. Merger accounting not permitted (but is required for Business Combinations involving Public Benefit Entities). To make textual entries explaining the business combinations go to the Compliance Database under Profit and Loss / Business Combinations. FAIR VALUE GAINS AND LOSSES Fair value gains and losses are posted in the Profit and Loss Account to codes from 450 to These values relate to what FRS 102 calls other financial instruments, i.e. non-basic ones. These codes cover: Investment properties PPE reversing previous revaluation decrease in profit or loss Complex loan agreements Investments in shares Long-term inter-company financial loans Long-term inter-company trading amounts Foreign exchange Derivative financial instruments Hedging financial instruments Hedged items Two user-defined financial instruments When posting to these codes from fixed assets, use the appropriate revaluation or foreign exchange codes to ensure that Statement of Cash Flows is not affected. 32

33 Relate Accounts Production When posting gains and losses in respect of complex loan agreements (and other financial liabilities), use the increase in the loan such as The amount posted to re complex loan agreements will offset that increase in the Statement of Cash Flows so that it is has no affect. AMORTISATION OF BASIC FINANCIAL INSTRUMENTS USING EFFECTIVE RATE OF RETURN The amortisation codes in the Profit and Loss Account when using the effective rate of return on basic financial instruments are 424, and when it results in interest income. When it results in interest expense, use 470, and When the amortisation relates to financial assets (not long-term debtors), post to 424 or 470. When it relates to long-term debtors, use or When it relates to financial liabilities, post to or In order to ensure the Statement of Cash Flows is unaffected by this amortisation: In the financial assets use the appropriate revaluation codes. In the debtors (that have flagged as long-term in the Compliance Database under Current Assets / Debtors over 1 Year) just change the debtor value. The postings to and will counter the effect of the change in working capital in the Statement of Cash Flows. In the financial liabilities use one of the new codes: , , , or Postings to these codes will not affect the Statement of Cash Flows. IMPAIRMENT OF SHORT-TERM DEBTORS AND CREDITORS To impair short-term debtors and creditors post directly to the debtors and creditors and use codes 380 and respectively in the Profit and Loss Account. The postings to 380 and will counter the effect of the change in working capital in the Statement of Cash Flows. USER-DEFINED INTANGIBLE FIXED ASSET Two additional classes of user-defined intangible asset have been added to the ledger. The codes are 608, , , 609, , , 610, , , 614, , , , 615, , , , , and As with the first of these user-defined intangible assets, the description and ixbrl tagging can be entered in the Compliance Database under Intangible and Tangible Fixed Assets / Intangible Assets. PROPERTY, PLANT AND EQUIPMENT As mentioned in paragraph 19 above, fair value gains can be reported to the Profit and Loss Account to the extent that it reverses a revaluation decrease of the same asset which was previously recognised in the Profit and Loss Account. PLANT AND MACHINERY Plant and Machinery can now be re-valued and impaired using codes , , 654, and

34 Relate Accounts Production INVESTMENT PROPERTY Investment Property must now be measured at fair value under FRS 102 where obtaining fair values is possible. The fair value gain or loss is posted to code 450. If fair values are not possible, then the cost model may be used (unlike in old GAAP). So there are now codes for the depreciation and impairment of investment properties which in the Profit and Loss Account are , and and in the Balance Sheet are 628, , , 629, , , , and and in Reserves are , and With fair value accounting on transition the investment property reserve balance must be transferred to the profit and loss reserve. Note also that any fair value gain is not distributable as a dividend, because it is not realised. A note on investment property will need to be included and can be entered in the Compliance Database under Intangible and Tangible Fixed Assets / Tangible Assets. Such text must include the basis of fair value, any security pledge and an indication of any undeveloped land that has been excluded from valuation at fair value. Example: The investment property was acquired on [date] and its fair value has been determined by an independent, professionally-qualified valuation expert by reference to recent market prices of similar properties in the area. The company s investment property has been pledged as security for borrowings. The directors are of the opinion that the fair value of the undeveloped land cannot be obtained without undue cost or effort on the grounds that market transactions for similar properties in the location are infrequent. Consequently, the land has been accounted for as property, plant and equipment and measured at cost less accumulated impairments losses. The Deferred tax value must be recognised on fair value gains and losses (codes 938, , and ). Also, there is an option in the Compliance Database under Reporting Parameters / Accounting Options to show Investment Property separately from Property, Plant and Equipment together with its own note. It is recommended to show it separately, because it is then consistent with the international standards. There is also the means now to disclose Investment Properties that are under Finance Leases in the Compliance Database under Intangible and Tangible Fixed Assets / Tangible Assets. LEASING For Finance Lease disclosure under FRS 102 is now required only of net carrying amounts and no longer of depreciation. Only non-cancellable Operating Leases now require the maturity analysis. DEFERRED TAX There are new codes for deferred tax in respect of business combinations: 936, , and The adjustment is made initially against goodwill (not profit or loss). 34

35 Relate Accounts Production There are also new codes for deferred tax in respect of unremitted earnings from overseas subsidiaries, associates and joint ventures. They are codes 934, , and Also that the discounting of long-term deferred tax liabilities is no longer permitted under FRS 102. DEFINED BENEFIT PENSION SCHEME Current service cost and net interest cost (as opposed to current service cost, interest cost and expected return on plan assets) are recognised in the Profit and Loss Account. Re-measurement of net defined benefit asset or liability (as opposed to actuarial gains and losses) is recognised in other comprehensive income (previously STRGL). For Group Defined Benefit Plans the defined benefit surplus or deficit is recognised on at least one entity s individual Balance Sheet. Accounting for the defined benefit cost follows this recognition. FRS 102 does not specify that the surplus or deficit be shown separately on the face of the Balance Sheet (unlike FRS 17). It is reported instead under Financial Assets or Provisions for Liabilities and Charges. DERIVATIVES Under FRS 102 it is now a requirement to include any derivatives in the financial statements. Such derivatives may arise from interest rate swaps, cross currency swaps and forward contracts for the purchase or sale of foreign currency or commodities. New codes have been introduced. Code 745 is for the derivative financial instrument asset and code 875 is for the derivative financial instrument liability. Fair value gains or losses on these derivatives are posted to code Example: Foreign exchange forward contract re sale worth $90,000 to the United States for settlement after 3 months using a forward rate of 1.33:$1: DATE DESCRIPTION DATE SPOT RATE Transaction 15th November Year-End 31st December Settlement 15th February FORWARD RATE TO 15TH FEBRUARY 2016 At transaction date sale recognised at the spot rate of 1.30 giving sales value and debtor of 69,231 and forward contract at fair value of zero At year-end date debtor retranslated at the year-end spot rate of 1.26 giving a foreign exchange gain and increase in debtors of 2,198; the derivative was recognised at fair value giving a loss on the derivative and an increase in the derivative liability of 2,643 At the settlement date the spot rate of 1.24 will be used to retranslate the debtor and to recognize the derivative at fair value. 35

36 Relate Accounts Production This process is different from the normal one using SSAP 20 when the forward rate at the transaction date is usually used to determine the debtor and sales value and settled at that rate. HEDGING Reporting hedging is now a requirement of FRS 102. The accounting policies on the three types of hedging are shown in the Compliance Database under Accounting Policies / Hedging. The three types are: 1. Fair Value Hedging 2. Cash Flow Hedging 3. Hedge of a Net Investment of a Foreign Operation Entries for a note must be made in the Compliance Database as well under Other Note Information / Hedges. The information required is: Description of hedges Description of hedging financial instruments and their fair values Nature of risks being hedged including description of hedged items New codes have been introduced for the Cash Flow Hedge Reserve and these are reported in the Statement of Changes in Equity. The codes are 986, , , and An example of Cash Flow Hedging is to post a loss in fair value of a derivative liability by debiting and crediting 875. Code has also been introduced Profit and loss reserve gain or loss on hedging instruments re net assets of foreign operations. This may be used to move an amount from the derivative liability (debit 875) to the profit and loss reserve (credit ). FINANCIAL INSTRUMENTS FRS 102 requires a note on financial instruments. This may be entered in the Compliance Database under Other Note Information / Financial Instruments. The main headings are: Credit risk Market risk Liquidity risk Three other headings may be entered, such as Foreign Currency Risk, Cash Flow Interest Rate Risk and Sensitivity Analysis. All the headings are editable. 36

37 Relate Accounts Production COMPANY SHARE OWNERSHIP FRS 102 requires disclosure of share ownership by: The company Subsidiaries Associates Joint Ventures The subsequent information may be entered in the Compliance Database under Capital and Reserves / Share Capital. REMOVAL OF DISCLOSURE REQUIREMENTS Under FRS 102 there are certain reductions in disclosure requirements, such as: Statement on Profit and Loss Account that there are no recognised gains and losses Statement on Profit and Loss Account that there are only continuing operations Statement on the historical cost of re-valued property and the accumulated historical depreciation of re-valued property Reconciliation of Shareholders Funds note and the columnar analysis in the Reserves note (other than the textual comments on the reserves), because the Statement of Changes in Equity covers them OFF-BALANCE SHEET ARRANGEMENTS It is a statutory requirement to always enter information about items that are off-balance Sheet. The means to do that is in the Compliance Database under Other Note Information / Off-Balance Sheet Arrangements. The details must include the nature and purpose of the arrangements and also the financial impact of the arrangements on the company. 37

38 Relate Accounts Production OTHER NON-FRS 102 ENHANCEMENTS TO THE COMPANY TEMPLATE DATABASE VALIDATION There is a new page that appears as the first page which lists any omissions from the following list and indicates where to make the entries. It is essential that the missing entries shown on this page are entered in the Compliance Database. Company Number Company Name Reporting Currency Share Capital Currency (except when no share capital exists or it is a UK/NI micro-entity) Company Reporting Size Company Status (Normal or Dormant) Country of Incorporation Business Address Registered Address Directors Share Capital (except when it is a company limited by guarantee without share capital or it is a UK/NI micro-entity) Number of Employees (except when it is a small UK/NI company or an ROI company limited by guarantee or a UK/NI micro-entity) Statutory Auditor (except when audit exempt) Name of Professional Body Auditor s/accountant s Firm Description INTRODUCTION OF INDUSTRIAL AND PROVIDENT SOCIETY ACTS ACCOUNTING (ROI) To activate go to the Compliance Database under Reporting Parameters / Accounting Options and tick the box Is the company subject to the Industrial and Provident Society Acts?. Then go to Reporting Parameters / Disclosure and change the name of the Annual Report, the name of the Committee and the heading for the Statement of Responsibilities. Adjust as necessary the text of the Statement of Responsibilities. Then enter the name and office type of the two signatories. The auditors report will refer to the appropriate Act. The Statement of Compliance will refer to the Industrial and Provident Society Acts. INTRODUCTION OF MICRO-ENTITY FINANCIAL STATEMENTS (UK/NI) To activate go to the Compliance Database under Reporting Parameters / Accounting Options and tick the box Micro-entity for which micro-entity regulations are to be applied?. 38

39 Relate Accounts Production To run the full financial statements, select Micro-Entity Abridged Accounts on the Produce Accounts screen. Format 1 of the Abridged Balance Sheet will be produced after the Abridged Profit and Loss Account. To select Format 2 of the Abridged Balance Sheet go the Compliance Database under Reporting Parameters / Disclosure and select it. Entries at the foot of the Abridged Balance Sheet re financial commitments and guarantees and re directors advances, credit and guarantees may also be entered in the Compliance Database under Reporting Parameters / Disclosure. No notes are produced. In order to file the Abridged Balance Sheet at Companies House, select Micro-Entity Abridged Balance Sheet on the Produce Accounts screen. This will include a statement at the foot of the Abridged Balance Sheet required by Companies House when excluding the Directors Report and the Abridged Profit and Loss Account as follows: The financial statements have been delivered in accordance with the provisions applicable to companies subject to the small company s regime. FOREIGN CURRENCY EXCHANGE DIFFERENCES IN INTANGIBLE/TANGIBLE FIXED ASSETS When posting foreign currency exchange differences, code is used to adjust the Profit and Loss Reserve. We now have a range of specific codes available when the adjustment is to Intangible or Tangible Fixed Assets. The notes will show the amounts separately against the description Foreign currency exchange differences. The new codes are: , , , , , , , , , , , , , , , , , , , , , , , , and EXTENSION OF THE NUMBER OF DIRECTORS NAMES UP TO 60 The number of directors that can be disclosed now goes up to 60. Each director may hold up to 6 classes of shares which will be disclosed in the Share Capital note. That means that up to 360 director/share classes may be disclosed. INTRODUCTION OF SUBORDINATED LOAN RESERVE The codes to post to are: 990, and It reports separately on the face of the Balance Sheet and the Statement of Changes in Equity. There is also a separate note on this reserve which is referenced from the Balance Sheet. To make entries in this note go to the Compliance Database under Capital and Reserves / Subordinated 39

40 Relate Accounts Production Loan. The note heading can be changed. Entries may be made for each of the directors and shareholders giving the names and the amounts. The heading of the list may also be changed. There is an option to show the movement in the Subordinated Loan from the comparative to the current year. Also text may be added both before and after the list. CHANGES TO THE STRATEGIC REPORT (UK/NI) Changes to the Strategic Report are per FRC s Guidance-on-the-Strategic-Report (June 2014). The entries in the Compliance Database under Strategic Report / Report Information now include the following: Review of Company s Business Development and Performance Other Key Performance Indicators There are overall 8 separate sections available for headings and text. There also options to move 4 items from the Directors Report to the Strategic Report. When the Strategic Report is used, the Cover page will refer to Reports and Financial Statements. STATUTORY AUDITOR SIGNATORY ON ABRIDGED ACCOUNTS (ROI) There is now an option to select to put the Statutory Auditor signatory on the Abridged Accounts, even though it isn t a requirement. The option is in the Compliance Database under Auditor s and Accountant s Reports / Statutory Auditor Signature on Abridged Accounts. USER-DEFINED AREAS IN THE DIRECTORS REPORT There are now 4 user-defined areas in the Directors Report together with relevant ixbrl tagging options. USER-DEFINED NOTES There are now 4 user-defined notes available. 40

41 Relate Accounts Production 41

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43 Sample Set of FRS 102 Accounts

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