Facts – When does new UK GAAP start

When does new UK GAAP start?

FRSs 100-103 will apply to accounting periods beginning on or after 1 January 2015, although the standards can be early adopted.

Mandatory adoption – non-small entities

We anticipate that very few entities will choose to early adopt (see section below), therefore 2016 will be when most accounts preparers and auditors will begin to deal with accounts prepared under the new standard.

[[[There is no need to adopt aspects of FRS 102 or to make pre-emptive disclosures ahead of time.]]]

There is no need to adopt aspects of FRS 102 or to make pre-emptive disclosures ahead of time. However the actual date of transition will be two years earlier than the first FRS 102 balance sheet (for a December year-end, this date was 1 January 2014). On adoption of the standard (e.g. for a December 2015 year-end), preparers will need to:

  • Restate the comparative (2014) balance sheet in full to comply with the new standard; and
  • Recalculate the opening comparative (2013) balance sheet in order to provide transitional adjustments to opening reserves.

The effect will be to present the 2015 accounts as if FRS 102 had always been in use. However, section 35 of FRS 102 lists five accounting issues (including accounting estimates) which must not be restated and also presents a number of transitional options. The ‘In depth’ section explores these in more detail.

Mandatory adoption – small and micro-entities

Small entities will, for the most part, adopt FRSSE 2015 for periods commencing on or after 1 January 2015 – however this regime will only last for a single year. For periods commencing on or after 1 January 2016, small entities will use FRS 102 albeit with simplified presentation and disclosure (as set out in section 1A of the standard).

Companies qualifying as micro-entities will be able to apply FRS 105 in place of FRS 102 should they wish to opt into this regime. Note that currently, the micro-entity regime is only available for companies (not for charities, LLPs and unincorporated entities).

Early adoption

[[[FRS 102 can be adopted for periods ending on or after 31 December 2012]]]

FRS 102 can be adopted for periods ending on or after 31 December 2012 (which would mean a transition date of 1 January 2011!). Small entities can early adopt FRS 102 with the small company simplified presentation and disclosure, set out in section 1A of the standard, for periods commencing on or after 1 January 2015 (in conjunction with early adoption of the associated changes to company law, which will otherwise apply for periods commencing on or after 1 January 2016).

Most entities are unlikely to consider early adoption, but this option will be more feasible for:

  • New entities (who will gain little by adopting ‘old’ UK GAAP);
  • Entities who can reduce tax (or improve tax cash flow) by early adoption;
  • Entities that benefit from some of the changes to accounting treatment (which are explored in the ‘main issues’ section).

Note that entities which are required to comply with a Statement of Recommended Practice (SORP) could not early-adopt FRS 102 if this would have entailed conflicts between the requirements of the FRS and the SORP. However, the relevant SORPs have now been issued and are compatible with new UK GAAP.