FD Intelligence

FRS 102: transitioning to Section 1A

Transitioning to FRS 102 Section 1A?  Here’s a checklist of areas to consider in preparation.

The date for preparation of the first small company financial statements in compliance with FRS 102 is 31 December 2016 for December year-ends.  Transition to this new framework was a major change for medium and large UK businesses from 1 January 2015 and now it is the turn for small entities.

Section 1A of this standard sets out the presentation and disclosure requirements for small entities, but the full recognition and measurement principles in FRS 102 will apply.  The impact of this will vary from entity to entity but here is a checklist of key areas to consider as the year end approaches:

  1. Have you already prepared a transition date balance sheet, and comparative financial statements fully restated for the effects of FRS 102?
  2. Have you considered whether to use the option to prepare abridged accounts?
  3. Have all loan agreements been reviewed to ensure that the classification of basic versus non-basic is correct?
  4. Have the accounting implications for intra-group long-term loans or those with terms that are not on an arm's-length basis been considered?
  5. Have the bank and other stakeholders been informed of the potential impact of the implementation of FRS 102 on performance?  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.
  6. Have properties been reviewed to assess whether the wider definition of investment properties under FRS 102 requires any properties to be reclassified, such as those that have been let on a non-arm's-length basis or to group members?
  7. Has a ‘timing difference plus approach’ been taken to taxation, such that deferred tax is recognised on items such as revaluations, rolled-over gains and fair value adjustments in business combinations?
  8. With the option to carry investments in publicly traded shares at cost having been removed under FRS 102, have such investments been stated at fair value?
  9. Are intangible assets being amortised over their useful economic lives? Only where a reliable estimate cannot be made can the presumed maximum of 10 years be used.
  10. Have forward foreign currency exchange contracts, and other derivatives, been recognised on the balance sheet at fair value?
  11. In the absence of a stated policy or contractual agreement, have group defined benefit deficits been recognised in the entity legally responsible for the plan?
  12. Have all available transition options been considered?

For an overview of the impacts of FRS 102 recognition and measurement principles on your financial statements, please read Factsheet 321: FRS 102 – impact on my company's accounts [ 136 kb ].

For more detail or support on your transition from FRSSE to FRS 102, please contact your usual Grant Thornton contact or Jake Green, Technical Partner, at jake.green@uk.gt.com or Jon Wallis, Senior Manager in our Financial Reporting Advisory Group at jon.w.wallis@uk.gt.com.