RSM Tenon: Changes to UK GAAP – are you ready?
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Simon Cooper RSM Tenon
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THE biggest change to UK accounting was broadly completed in March this year with the publication of Financial Reporting Standard 102 (FRS 102), the third of three new standards which will form the bulk of the UK accounting framework from 2015. FRS 102 is expected to be the standard of choice for most unquoted large and medium-sized companies, typically those with turnover above £6.5m per annum, total assets of more than £3.26m and more than 50 employees. But what does all of this mean for businesses and how should they make sure they are ready to deal with the impact of FRS 102? In summary, almost all of the current accounting standards are being replaced by FRS 102 largely because existing UK accounting standards have become dated, unwieldy and increasingly struggle to meet all of the needs of users of accounts. In addition, for a number of years, there has been a programme of converging UK standards with International Financial Reporting Standards (IFRS) and whilst those frameworks are still not fully aligned, the introduction of FRS 102 is a great leap forward in that respect. Whilst the new standard can be adopted early, it will be mandatory for accounting periods commencing on or after 1 January 2015. Typically those companies caught in the first wave of adoption will be those preparing accounts for the year ending 31 December 2015. However, since accounts must include comparative information, companies really need to be ready for the new standards from 1 January 2014. This is effectively the D Day for companies adopting FRS 102 and requires action and planning far earlier than the headline date might suggest. Experience has shown than many companies operate on the premise of putting off apparently non-essential changes until the last minute, but in this case being prepared and speaking to accountants and auditors now will allow them to make reasoned and considered decisions and take advantage of genuine planning opportunities on transition to FRS 102. When quoted businesses moved over to IFRS in 2005, many seriously underestimated the task at hand resulting in dedicating significant time and resource at the last minute to ensure that they were compliant. We are trying to help businesses avoid a similar situation arising with the transition to FRS 102. One consequence of the adoption of FRS 102 is that reported profits may change because of the different accounting treatment and this could impact upon a company’s tax charge and its ability to pay dividends. Another critical factor to consider concerns banking covenants which would have been tested against accounts prepared under the current rules. Without action, the adoption of FRS 102 may cause a breach of banking covenants which could be avoided if the impact is assessed beforehand and covenants re-negotiated before a breach occurs. With a wealth of things to consider, RSM Tenon is staging a number of advisory events to help businesses get up to speed with the changes, including practical advice and guidance on how and when they should prepare. An advisory event on FRS 102 will be held in Birmingham in September on a date to be confirmed. Please keep an eye on the RSM Tenon website www.rsmtenon.com/events for more details or email Sarah Duggan to be notified when a date and venue are confirmed sarah.duggan@rsmtenon.com More articles in
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