CCH New UK GAAP: An at a glance comparison between new and old UK GAAP and IFRS. Anne Cowley ACA

Transcription

1 CCH New UK GAAP: An at a glance comparison between new and old UK GAAP and IFRS Anne Cowley ACA

2 What s new in New UK GAAP an at a glance comparison between new and old UK GAAP and IFRS February 2017 For the rst time, this updated version of the guide compares the requirements of with FRS 105, the micro-entities standard, in addition to old UK GAAP and EU-adopted IFRS. The entire guide has been reviewed to re ect all changes to and EU-adopted IFRS up to 31 December 2016, including updated comparisons with IFRS 9 Financial Instruments; and IFRS 15 Revenue from Contracts with Customers, which are now endorsed by the EU but not yet effective. The guide is available on CCH Online along with active links to the underlying standards and legislation.

3 and scope of this guide Framework and scope of this guide 1 CCH New UK GAAP: An at a glance comparison between new and old UK GAAP and IFRS Abbreviations used CA 2006 The Companies Act 2006 CGU FRC FRS IAS IFRS IGU OCI PPE SI SORP SSAP UK GAAP Cash generating unit Financial Reporting Council Financial Reporting Standard International Accounting Standard International Financial Reporting Standard Income generating unit Other comprehensive income Property, plant and equipment Statutory Instrument Statement of Recommended Practice Statement of Standard Accounting Practice UK Generally Accepted Accounting Practice 1 Framework and scope of this guideframework 1.1 The UK nancial reporting regime The launch of a new nancial reporting regime for UK companies and other reporting entities in March 2013 changed the UK nancial reporting landscape signi cantly. In one fell swoop, all extant FRSs, SSAPs and UITF abstracts were swept away and replaced by a suite of six FRSs: FRS 100 Application of Financial Reporting Requirements sets out the overall framework for nancial reporting, explaining which standards apply to various types of entity, when an entity can apply the reduced disclosure framework available through FRS 101, and when an entity should also make reference to a SORP. FRS 101 Reduced Disclosure Framework constitutes a reduced disclosure framework, available to qualifying entities which otherwise apply the recognition, measurement and disclosure requirements of IFRS as adopted by the EU. Such entities which include subsidiaries and parent entities which meet certain criteria can elect to apply this reduced disclosure framework when preparing their individual nancial statements. The Financial Reporting Standard applicable in the UK and Republic of Ireland contains all the detailed accounting requirements for those entities not applying EU-adopted IFRS, FRS 101 or FRS 105. The current version, published in September 2015, includes speci c provisions for small entities, including Section 1A which sets out disclosure exemptions.

4 2 CCH New UK GAAP at a glance FRS 103 Insurance Contracts is relevant to entities applying that issue insurance contracts, this standard is expected to have a short shelf-life pending the updates to insurance accounting under IFRS and the introduction of Solvency II. FRS 104 Interim Financial Reporting applies to the presentation of interim nancial information, based on IAS 34. FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime was issued in July 2015 as part of the FRC s larger project on making appropriate standards available for the smallest entities that also tted with new company law requirements. This guide gives an overview of the key features of the main UK nancial reporting standard,, the requirements of old UK GAAP, EU-adopted IFRS and, for the rst time, the micro-entity standard, FRS Scope and effective date applies to nancial statements that are intended to give a true and fair view and are not prepared under EU-adopted IFRS, FRS 101 or FRS 105. Small companies can opt to use with Section 1A, allowing them to present fewer disclosures; however, such accounts must still give a true and fair view. FRS 105 applies to nancial statements prepared by companies and LLPs which are eligible for and opt to apply the micro-entity regime. The properly prepared accounts of micro-entities are presumed to give a true and fair view. Under CA 2006, a company is treated as micro, small or medium-sized if it does not exceed more than one of the following criteria for two consecutive years (and as long as it is not ineligible to apply the regime see CCH Preparing Small and Micro Company Accounts for further detail): Micro s. 384A Small s. 382(3) Medium-sized s. 465(3) Turnover 632, m 36m Balance sheet total 316, m 18m Average number of employees (on a monthly basis) Companies can opt to apply a more onerous framework than the minimum, so for instance, a company that is eligible to qualify as a micro-entity can choose to use rather than FRS 105. The implementation date of differed for small and non-small entities. Non-small (i.e. medium/large) entities were required to adopt (unless opting for IFRS or FRS 101) for accounting periods commencing on or after 1 January Reduced disclosures for qualifying entities (broadly, companies within a group which prepares publicly available consolidated accounts) are also available under. Small companies are also required to adopt, with the optional Section 1A dealing with reduced disclosure requirements, for accounting periods commencing on or after 1 January FRS 105 also took effect from 1 January 2016, though this date is less relevant since the use of this standard is completely optional for entities within its scope and it can be adopted early without restriction.

5 Framework and scope of this guide 3 Since was rst published in 2013, several sets of amendments have been issued. These, together with their effective dates, are as follows: Date issued Amendment Effective for periods commencing on/after July 2014 Basic nancial instruments and hedge accounting 1 January 2015 February 2015 Pension obligations 1 January 2015 July 2016 Small entities and other minor amendments 1 January 2016 March 2016 Amendments to fair value hierarchy disclosures 1 January 2017 December 2016 Removal of requirement for qualifying entities to notify shareholders 1 January 2016 There have also been other minor editorial amendments and clari cation statements. This edition re ects all amendments made up to 31 December Interaction of with other standards Although was drafted to be self-contained, it does include a small number of references to other standards: Section 1 requires that entities choosing to report earnings per share, or to provide segmental information (which is described as such) must comply with the relevant standard in IFRS, being IAS 33 and IFRS 8 respectively. It also refers entities with insurance contracts and instruments with discretionary participation features to FRS 103 Insurance Contracts. Sections 11 and 12 contain three options for the recognition and measurement of nancial instruments; as an accounting policy choice, entities may: use these two standards for the recognition and measurement of nancial instruments; apply the recognition and measurement principles of IAS 39 (as adopted in the EU) with the disclosure requirements of Sections 11 and 12; apply the recognition and measurement principles of the combination of IFRS 9 and IAS 39, with one mandatory departure from IFRS 9, again with the disclosure requirements of Sections 11 and 12. Section 34 requires entities involved in exploration for and/or evaluation of mineral resources to apply IFRS How this publication works This guide is set out in sections corresponding to the sections in. The rst column gives an outline of the key points for each topic in the section, rather than being a complete description of its contents. The differences columns then contain comments only where FRS 105, old UK GAAP or IFRS has requirements that are substantively different from those of. If these columns are blank, it can be assumed that the treatment in the relevant GAAP is substantively the same as in. In general, disclosure requirements are not addressed here, as summarising them usually leads to loss of value. Disclosures are dealt with in more detail in CCH s related products, CCH Preparing Accounts (large and medium-sized companies) and CCH Preparing Small and Micro Company Accounts (small companies and micro-entities). It should be noted, though, that the standard includes special provisions for qualifying entities, allowing exemptions from some of the disclosure requirements in the entities company (not group) accounts. A qualifying entity is de ned in as a member of a group where the parent of the group prepares publicly available consolidated nancial statements intended to give a true and fair view, and that entity is consolidated into those nancial statements. These exemptions

6 4 CCH New UK GAAP at a glance are available providing that a summary is given within the accounts of which exemptions have been taken. Following amendments made in December 2016, for periods beginning on or after 1 January 2016, it is no longer necessary to obtain shareholder approval in order to make use of the qualifying entity disclosure exemptions. The exact exemptions are set out in Section 1 of. Some of them are dependent on whether or not the entity is a nancial institution ( nancial institutions may not take any exemption from the requirements of Sections 11 and 12 on nancial instruments). Others may only be used if equivalent disclosures are included in the group accounts. Preparers should always look to the full standard when preparing accounts and making accounting policy decisions. 1.5 Relevance to small and micro-entities contains a reduced presentation and disclosure regime for small entities, which is set out in Section 1A. This regime replaced the FRSSE, which was withdrawn at the start of Because Section 1A deals only with presentation and disclosure, it is not considered further in this product (see instead CCH Preparing Small and Micro Company Accounts). There are no simpli cations in terms of accounting treatment for small companies in ; they must follow the full recognition and measurement requirements set out in the standard. This guide is therefore equally relevant to small companies applying Section 1A, because their only reliefs from applying in full relate to presentation and disclosure. This edition of the guide additionally considers the key differences between and FRS 105, the micro-entity standard, so is also highly relevant for those assessing whether to opt for the much simpli ed micro-entity regime. 1.6 A note on current IFRS and old UK GAAP The version of old UK GAAP used here is that which applied to a private company which was not applying FRS 26 (and was therefore also not applying FRSs 23, 24 or 29). It includes the relevant parts of the Companies Act and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410), although since these continue to apply to a company using, the legal requirements tend not to give rise to any differences. For current IFRS, IFRS 9 will replace IAS 39. It was endorsed for use in the EU in November 2016 and will take effect for periods commencing on or after 1 January Because it will be effective in due course, IFRS 9 has been used as the comparator standard in respect of nancial instruments. The new revenue standard, IFRS 15, is also expected to take effect for periods commencing on or after 1 January 2018, and was endorsed in September 2016 (although further clari cations to IFRS 15, issued in April 2016, have not yet been endorsed). Accordingly, IFRS 15 has been used as the comparator standard in respect of revenue recognition. At the time of writing, IFRS 16 Leases, which was published in 2016 and takes effect for periods beginning on or after 1 January 2019, has not been endorsed for use in the EU. Therefore, the existing standard, IAS 17, has been used as the comparator standard for lease accounting. 1.7 Overview of sections where there are differences The following table shows, for each section of, whether there are any differences of note between the new standard and old UK GAAP or IFRS. Where a cell is blank, this indicates that the requirements are very similar or the same. Where a section is marked as N/A for FRS 105, this indicates that the equivalent section and requirements are not included in FRS 105.

7 Framework and scope of this guide 5 Section number Old UK GAAP areas with differences 1 Scope see 1.2 above 1A Small Entities (disclosure IFRS areas with differences see 1.2 above (disclosure FRS 105 areas with differences see 1.2 above (disclosure 2 Concepts and pervasive principles 3 Financial statement presentation 4 Statement of nancial position 5 Statement of comprehensive income and income statement 6 Statement of changes in equity and N/A statement of income and retained earnings 7 Statement of cash ows N/A 8 Notes to the nancial statements (disclosure 9 Consolidated and separate nancial statements 10 Accounting policies, estimates and errors (disclosure N/A 11 Basic nancial instruments 12 Other nancial instruments issues 13 Inventories 14 Investments in associates 15 Investments in joint ventures 16 Investment property 17 Property, plant and equipment 18 Intangible assets other than goodwill 19 Business combinations and goodwill 20 Leases 21 Provisions and contingencies 22 Liabilities and equity 23 Revenue 24 Government grants 25 Borrowing costs 26 Share-based payment 27 Impairment of assets 28 Employee bene ts 29 Income tax

8 6 CCH New UK GAAP at a glance Section number Old UK GAAP areas with differences IFRS areas with differences FRS 105 areas with differences 30 Foreign currency translation 31 Hyperin ation N/A 32 Events after the end of the reporting period 33 Related party disclosures N/A 34 Specialised activities 35 Transition to this FRS Not dealt with in this guide as transition to old UK GAAP is no longer possible