Audit and assurance

FRS 102 considerations for finalising 2014 accounts

Changes around financial reporting as we move from UK GAAP to FRS 102 could affect your 2014 comparative accounts. Here’s a checklist of areas to consider.

The Financial Reporting Council (FRC) has replaced current UK GAAP with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland with effect from periods beginning on or after 1 January 2015.  This means 31 December 2015 year-end accounts will be the first prepared under the new regime. For an overview of the impacts of FRS 102, read our guide to how the UK GAAP changes affect your business (PDF) [ 140 kb ].   

As comparatives will be restated, the first balance sheets prepared using the new requirements will be as at 1 January 2014 and the first comparative year will be as at 31 December 2014.

Transition to this new framework will be a major change for UK businesses and, for many entities approaching a 31 December 2014 year end, this is a crucial time to be planning for this transition and considering how the 2014 comparative year will be presented in the first set of FRS 102 financial statements.

The impact of these changes will vary from entity to entity but here is a checklist of key areas to consider as the year end approaches and when finalising 31 December 2014 accounts.

FRS 102 checklist

  • Review lease agreements to determine classification and treatment under FRS 102.
  • Review loan and other financial instrument agreements to determine treatment under FRS 102.
  • —Consider whether to apply IAS 39/IFRS 9 to account for financial instruments, in place of FRS 102, in preparation for restatement.
  • Benchmark existing revenue recognition policies against the wording in FRS 102, and identify the impact of any differences.
  • If not done already, consider negotiating a 'frozen GAAP' clause with the bank, to enable loan covenants to continue to be reviewed against current UK GAAP.
  • Where desired, it’s advisable to ensure all necessary documentation for hedge accounting is in place.
  • Assess the benefits of aligning the holiday year with the financial year.
  • Consider whether the HR system is sufficiently sophisticated to capture the information required for the holiday pay accrual.
  • Consider the accounting requirements of FRS 102 when negotiating or re-negotiating loan or lease agreements.
  • Bear in mind that business combinations made from this year onwards will need to be accounted for in compliance with FRS 102. Consequently, be sure to obtain valuations of identifiable assets in a business combination as at the date of acquisition.
  • Consider preparing 'shadow' FRS 102 accounts, in addition to the last under current UK GAAP.

Example financial statements

To help in the preparation of FRS 102 accounts, we have produced a set of illustrative group and parent company financial statements prepared for the first time in accordance with FRS 102. You can download it here: FRS 102 Limited Example Financial Statements (PDF) [ 688 kb ]. The document highlights disclosure requirements introduced by FRS 102 or areas of difference in comparison to existing UK GAAP; source references for the illustrative disclosures have been included in the right-hand margin.

For more detail or support on your transition from UK GAAP to FRS 102, please contact your usual Grant Thornton contact or Jake Green, Director of Financial Reporting, at jake.green@uk.gt.com who will be happy to support. Alternatively visit our UK GAAP page for more information.

Download guide
Download PDF [ 688 kb ]