19/05/2015. The new EU Accounting Directive what UK companies need to know now. The new EU Accounting Directive what UK companies need to know now

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1 The new EU Accounting Directive what UK companies need to know now 19 May 2015 Download the slides to accompany the webinar /FRFwebinars The new EU Accounting Directive what UK companies need to know now 19 May 2015 Introduction Nigel Sleigh-Johnson Head of Financial Reporting Faculty 1

2 Introduction Bill Telford Training Consultant Ken Rigelsford Director at Deloitte 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 2

3 Contents What are the regulations and why do we need them? Revised definition of a small company Changes to small company accounts Revised format options Other changes Effective date The new EU Accounting Directive WHAT ARE THE REGULATIONS AND WHY DO WE HAVE THEM? The regulations The Companies, Partnership and Groups (Accounts and Reports) Regulations 2015 (SI ) Implement EU Accounting Directive Revise definition of small company Reduce disclosures in small company accounts Prohibit additional disclosure requirements Other change Remove option to include details of subsidiaries, associates in annual return, rather than the financial statements Effective accounts approved after 1 July

4 REVISED DEFINITION OF A SMALL COMPANY The regulations Increase small and medium sized limits to maximum possible No change for micro Audit threshold will increase subject to new consultation on implementing Audit Directive Revise ineligibility criteria The limits Current Turnover Balance sheet E es Revised Current Revised m m m m Micro Small Medium Small group Gross Net Medium group Gross Net Limit changes apply to companies, including charitable companies but not LLPs Current 4

5 Ineligible companies Directive includes definition of public interest entity BIS initially proposed allowing plc to be included in small companies regime Decided not to extend regime to the plc but did extend it to members of a group including a plc (unless traded) Regulations also revise definition of an ineligible group such that a group including a plc is not included unless it is traded Do not require group accounts Impact More small companies Use accounting provisions of small companies regime Use small company accounting standard Audit exempt More small groups Exempt from the requirement to prepare group accounts Micro-companies No direct changes in eligibility, accounting requirements etc. Incidental changes because of revised definition of ineligible companies 5

6 Linked FRC consultations FRS 100 EU adopted IFRS FRS 101 FRS 102 FRS 105 FRS 102 FRS 102 Reduced disclosure FRS 102 for small entities Poll 1 If your company qualifies as a microentity, or your firm advises such companies, which of the following is the most applicable? CHANGES TO SMALL COMPANY ACCOUNTS 6

7 The changes Applicable to all small companies Reduced notes Change in filing requirements Changes conditional on shareholder approval Preparation of abridged accounts Revised notes 1. Accounting policies 2. Fixed assets revaluation table 3. Fair value(s) 4. Financial commitments, guarantees or contingencies not on the balance sheet 5. Advances & credits etc. 6. Exceptional items 7. Amounts due or payable after > 5 years and entire debts covered by security 8. Average number of employees during the year 9. Fixed Asset note 10. Name and registered office or principal place of business of smallest company producing group accounts in which entity is included 11. Nature/purpose of arrangements not on the balance sheet 12. Material non adjusting events after balance sheet date 13. Related party transactions (with scope for exemption for wholly owned group companies) Some may be disclosed Some must Small company abridged accounts Abbreviated accounts as we now know them are dead. Company may prepare its full accounts with abridgements if agreed by all shareholders EVERY YEAR One set of accounts only. Abridged accounts and true and fair view 7

8 Small company filing options Need not file profit and loss account or directors report But must file balance sheet and notes If file profit and loss account and balance sheet Must file audit report if applicable If do not file profit and loss account The balance sheet filed must include a statement about auditor s report if applicable REVISED ACCOUNTING FORMATS AND THEIR APPLICATION The formats B C I II III I Fixed Assets Intangible Assets Tangible Assets 1 Land and buildings 2 Plant and machinery 3 Fixtures, fittings and equipment 4 Payments on account and assets in course of construction Investments Current assets Stocks 8

9 The formats B Fixed Assets Arabic format may be combined or adapted I Intangible Assets II Tangible Assets 1 Land and buildings Alphabetic 2 and Plant Roman and machinery numerals appear in form and 3 Fixtures, order prescribed fittings and by equipment Act 4 Payments on account and assets in course of construction III Investments C Current assets I Stocks Profit and loss account is all Arabic... 1 Turnover 2 Cost of sales 3 Gross profit 4 Distribution costs 5 Administrative expenses 6 Other operating income Operating profit 7 Interest receivable 8 Interest payable Profit before taxation 9 Tax on profit or loss 10 Profit after tax The building block approach Large Medium Small Micro 9

10 Building block approach Others All 3 Small abridged Alphabetic and Roman Micro Alphabetic Micro-entity Fixed assets 6,600 Current assets 3,040 Creditors: amounts becoming due and payable within one year 970 Net current assets 2,070 Total assets less current liabilities 8,670 Capital and reserves 8,670 Small company abridged accounts Fixed Assets Intangible assets 1,900 Tangible assets 4,700 6,600 Current assets Stocks 1,700 Debtors 1,120 Cash at bank and in hand 220 3,040 Creditors: amounts becoming due and payable within one year 970 Net current assets 2,070 Total assets less current liabilities 8,670 10

11 Small company abridged accounts Capital and reserves Subscribed capital 1,000 Share premium account 1,000 Profit and loss account 6,670 8,670 Abridged profit and loss account.. 1 Turnover 2 Cost of sales 3 Gross profit 4 Distribution costs 5 Administrative expenses 6 Other operating income Operating profit 7 Interest receivable 8 Interest payable Profit before taxation 9 Tax on profit or loss 10 Profit after tax The true and fair conundrum Micro-company accounts are presumed to be true and fair Full accounts complying with FRS 102 required to be true and fair What about abridged accounts? 11

12 OTHER CHANGES Other changes Equity accounting permitted in separate accounts of investor of participating interests Prohibited by FRED 59 Useful life of goodwill if unable to measure reliably Increase from 5 years to 10 years and inclusion of in exceptional circumstances Audit changes Change in auditor s report in relation to directors report and strategic report 12

13 EFFECTIVE DATE Effective date Periods commencing on or after 1 January 2016 Early adoption permitted for periods commencing on or after 1 January 2015 if it reduces regulatory burden But does not change audit exemption limit for periods before 1 January 2016 Illustration 2 Medium Needs Audit Small Needs Audit Small No Audit Banana Ltd started trading on 1 January Turnover 6.8 m 7.0 m 7.5 m Balance sheet 3.5 m 3.7 m 3.9 m Employees

14 Poll 2 When are you, or your clients, most likely to adopt the new regulations? Any questions? Ask a question Participate in today s webinar send us a question Click here to see questions 14

15 Factsheets 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 Bill Telford Training Consultant Ken Rigelsford Director at Deloitte 15

16 Future events and webinars Events See /frfevents for details of our upcoming events Webinars See /webinars for details of our upcoming webinars Don t forget you can also access recordings of previous webinars THANK YOU FOR ATTENDING Contact the Financial Reporting Faculty +44 (0) frfac@ Please take the time to fill out our short survey A world leader of the accountancy and finance profession 16