FRS102 Triennial Review 2017

By Sam Thomas | 14th December 2017 | 5 min read

 

Developing long term relationships with clients is of crucial importance to all businesses. However many practices become ‘stuck’ providing the same service to their clients year after year. The real challenge is to evolve from a single transactional relationship to one with an emphasis on customer retention, satisfaction, and lifetime customer value.
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Another benefit of the Client Engagement Matrix data is the high and low performing fee analysis. The report highlights average service line values which can be compared against other firms or across industry sectors.  
The Client Engagement Matrix helps business leaders to make more informed decisions, target the ‘underperforming’ clients and service lines allowing for speedy resolution.  It can:
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Ill informed decisions can have a negative impact to a business with serious consequences to finances, reputation and future growth.  IRIS CRM allows business leaders to collate meaningful information, make better informed decisions and take steps to successfully develop their business.

FRS 102 was originally issued on in March 2013 for accounting periods on or after 1 January 2015, since that date a few amendments have been released ironing out some of the initial implementation issues. FRS 105 was released in July 2015 alongside Section 1A of FRS 102 catering for smaller entities. The Financial Reporting Council (FRC) always planned to review FRS 102 every three years and today’s announcement concludes the first triennial review, which includes consequential amendments to other standards.

Overview of changes

The final version of the changes to FRS 102 have been released today (14th December 2017). FRED 67 was issued in March 2017, with comments due by 30 June 2017. 34 responses were received by the FRC, confirming FRS 102 is ‘working well in practice, but there are a small number of areas where a significant improvement could be made to the cost-effectiveness of FRS 102 without loss of useful information.’ Some changes have also filtered down to FRS 105.

The changes are to be effective for accounting periods beginning on or after 1 January 2019, with early adoption permitted as long as all amendments are applied together. There are a couple of exceptions, including directors loans and tax effects for gift aid payments, which can be early adopted separately.

What has changed?

The five key principal areas of changes include:

  1. Investment property rented to another group entity
  2. Classification of financial instruments
  3. Directors loans – this change was released earlier this year due to issues around timing for smaller entities
  4. Intangible assets acquired in a business combination
  5. Definition of a financial institution

What smaller changes have been made?

FRS 105 

As well as changes to FRS 102, some small changes have been made to FRS 105 for micro entities. These changes will be effective immediately as they are required by Company Law. 

A new paragraph has been inserted to include the disclosure required by section 396(A1) of the Companies Act, where a company must state: 

  • The part of the UK where the company is registered
  • The registered number
  • The type of company it is
  • The registered office address
  • If appropriate, if the company is being wound-up

Paragraph 6.2 is amended to include disclosure of off balance sheet arrangements required by section 410A of the Companies Act and employee numbers as required by section 411 of the Companies Act. These should now be disclosed in the notes section at the foot of the Statement of Financial Position.

FRS 102 1A – Small Entities

Only a couple of significant changes have been made within Section 1A of FRS 102. The main one being a new paragraph added to align the wording of the statement of compliance with company law, that should be included on the Statement of Financial Position.

FRS 102

Along with the principal changes already mentioned, a few smaller enhancements include:

  • Paragraph 5.9B is altered so any profit on disposal of a discontinued operation shall be excluded from operating profit, if presented in the Income Statement.
  • Statement of cash flows
    • The reconciliation to net cash can optionally start at the operating profit figure rather than the profit or loss for the year, due to a slight change in the wording to include ‘a measure of’ profit or loss.
    • A new paragraph, 7.22 is added to disclose the analysis of changes in net debt.
  • Inventories

Paragraph 13.22(c) has been deleted, so the amount of inventories recognised as an expense is no longer required to be disclosed.


IRIS and PTP Accounts Production will be updated to reflect the new regulations well before practices need to make their first submissions using the new standards. IRIS was at the forefront delivering FRS compliant accounts well ahead of the initial mandation date, allowing our customers time to adapt and prepare for the changes. It’s our ambition to maintain our leadership position by offering the most comprehensive solution available. Our most recent releases introduced even more options enabling practitioners to prepare FRS accounts exactly as they want them.