FRS: A New Way of Working
Part I – The story so far
Adapting to the latest FRS is changing business relationships as UK GAAP goes through its most significant evolution in years.
International Financial Reporting Standards (IFRS) have been progressively replacing the various national accounting standards with a single international framework, one which accountants in the UK are now required to work with when dealing with small- and medium-sized entities.
While a few early adopters chose to work within the new framework before the deadline, it is only now that the majority of the profession are beginning to address the impact of FRS 101 to 105 on the way organisations work with accountants.
We’ve listed some of the major changes below:
- Sweeping changes to the way in which some transactions are accounted for and disclosed, particularly for small and micro-entities
- First-time adoption of the new standards must be applied retrospectively as at the date of transition; that is, the first day of the comparative period
- The requirement to place additional assets and liabilities on the balance sheet (such as derivative instruments) creates a significant amount of additional work
- Derivative financial instruments will usually be measured at fair value through profit or loss, unless the entity applies the hedge accounting provisions, so this is an added issue that needs to be considered by directors
- Changes to fair value gains and losses in respect of investment property, which should now be taken directly to profit or loss rather than a revaluation reserve. In addition, deferred tax must be brought into account for such properties
- Intangible assets and goodwill now have their useful economic life limited to ten years or less if management cannot arrive at a reliable estimate for the intangible asset or goodwill’s useful economic life
- Under FRS 102 and FRS 105, the use of LIFO for stock valuations is prohibited
The list goes on...
Transforming the accountant-client relationship
Requirements such as these, coupled with HMRC’s incoming ‘Making Tax Digital’ initiative, are transforming the relationship between accountants and the businesses they support.
At IRIS, we’re now seeing our customers adopting full FRS 101 and 102 in earnest, and are experiencing a rapid escalation in the volume of calls from people transitioning their clients to FRS.
In the last couple of months, there has been a significant increase in the use of our tools and resources for FRS, such as our step-by-step guides, and extensive take-up of our classroom and web-based training courses.
You can find all of these resources plus much more, including whitepapers and a free-to-use transition cost calculator, at the IRIS FRS Hub.