The third in our series of accounting changes blogs focuses on small and medium companies.
A new financial reporting standard has been introduced, called FRS 102, which replaces all the previous UK standards in issue that were applicable to medium sized companies. The standard takes effect for accounting periods starting from 1 January 2015.
The main changes relate to the treatment of certain items in the accounts, rather than disclosure. A set of FRS 102 accounts for a medium company will look very similar to how they look now.
Major changes are ahead for small companies…. from 1 January 2016 small companies will be brought within the scope of FRS 102. There will be less disclosure by way of notes than for medium companies, and no requirement for a cash flow statement, but the accounts will likely have more disclosure than currently required under FRSSE 2008/2015 (the financial reporting standard for small entities). For example, the accounts will need to disclose the average number of employees during the year – this has only been mandatory for medium companies previously. Also there will be a note for remuneration and dividends paid to Directors, and the major thing here is that if there’s a note, it gets filed at Companies House.
So far (see our blog on Abbreviated Accounts) we have been able to file a set of accounts on to public record that only had a few notes…. when abbreviated accounts disappear, if it’s in a note, it’s going on public record! There are no two ways about it… this is more disclosure than previously has been required. Keep your eyes open for our next blog, which will explore the alternative options that might be available, and what might be the right thing for your company.
There are also changes coming in how we treat certain items in the accounts, under FRS 102. In the coming months we will be asking our clients about their holiday year end. Inevitably they are going to think that’s a little odd, but there is method behind our seeming madness! Going forward (where the figures justify) an adjustment will be required in the accounts for holiday pay – either if staff have not taken the holiday entitlement they are allowed to, on a pro rata at the accounts year end, or it falls the other way.
Other changes are that deferred tax will be required on revaluations, both of investment properties and property, plant and equipment. This has never been required before, unless there was a binding agreement to sell the asset in question. For some companies, this could have a significant impact on the balance sheet. We will be talking to clients who this may affect when preparing their accounts over the next few months, but if this is something that concerns you, please do get in touch.
Those that qualify as a micro company will have the option of preparing micro accounts (under a different accounting standard, called FRS 105). Keep your eyes peeled for our next blog, which will compare the accounting standards for micro and small companies!
If you have any questions on the above, please contact us on 0116 242 3400.
Coming soon….. “Micro or Small… What’s the Difference?”
Katie Kettle, Technical Manager