Changes to UK GAAP


UK GAAP, which underpins charity reporting, is changing with a new regime proposed for accounting periods beginning on or after 1 January 2015.  At the core of the ‘New UK GAAP’ is a single comprehensive new standard, FRS102, which will replace almost all SSAPs, FRSs and UITFs.


In March 2013 the Financial Reporting Council issued


– FRS100 Application of Financial Reporting Requirements,


– FRS101 Reduced Disclosure Framework and


– FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.


FRS102 will be applicable to all UK companies (except those required or opting to report under EU-adopted IFRS and small entities reporting under the FRSSE), meaning the majority of large and medium sized UK entities, including public benefit entities, will apply FRS102 when preparing their financial statements.


Initial plans to have a separate standard for public benefit entities have been abandoned, instead additional guidance for public benefit entities has been inserted into FRS 102 and changes have been made to the proposals in FRED 45 FRS for Public Benefit Entities, notably in clarifying the treatment of donated goods or services.


The key difference between current UK GAAP and FRS102 include:


– The basis of measuring and recording Financial Instruments, Investments in shares, Derivatives and Foreign exchange forward contracts


– The basis of valuing Investment properties


– The basis of determining the useful life of Goodwill and Intangible assets


– When Hedge accounting can be applied


– The basis of accounting for step acquisitions and disposals of subsidiary companies


– How intangible assets are recognised in a business combination


– The basis of accounting for group reconstructions


– The basis of recognising deferred tax


– The basis of accounting for defined benefit pension plans and group defined benefit pension plans


The first set of financial statements that are required to be prepared under FRS102, say 31 March 2016, will include comparative figures to 31 March 2015 that will need to be restated on the basis that they had been prepared in accordance with FRS102.  In order to restate the Income and Expenditure account for the year ended 31 March 2015 the opening Balance Sheet for that year, 1 April 2014, or effectively 31 March 2014 will need to be restated.  Early adoption is permitted for accounting periods ending on or after 31 December 2012.


Charities are also required to prepare their financial statements in accordance with the Charity SORP and early adoption of the new FRSs is only permitted if it does not conflict with the requirements of the current SORP.  A new charity SORP, which will aim to eliminate conflict with the new FRS is currently in the consultation process.


Small entities will continue to have the option to prepare their financial statements in accordance with the FRSSE which will be known as FRSSE (effective January 2015).  This new standard is based on FRSSE (effective April 2008) with consequential amendments being made to update references to accounting standards that will be withdrawn or for greater consistence with legislation.  Two additional amendments to the new FRSSE relate to the useful life of goodwill and intangible assets which will be presumed not to exceed five years (although this can be rebutted) and to requiring an annual assessment of indications that an asset should be written down.


If you would like more information on this topic, please call 01772 821021.