At the start of 2015, the new UK GAAP took mandatory effect, providing a complete overhaul of the accounting rules in the UK and Ireland by introducing FRS 101 and FRS /102. The preparation of financial statements for December 2015 year-end is now well underway, but with the various amendments, comments and discussions making the process more complex, exactly what are the challenges that companies need to address in order to stay compliant?
Since the announcement of the new frameworks, we have been doing our utmost to make the change over to FRS as straightforward as possible. The new standards are expected to bring significant benefits, helping to improve efficiency and enable cost-savings by streamlining reporting. In addition, they should improve data analysis for shareholders and stakeholders, allowing for greater transparency across Europe.
The new standards came into effect for accounts beginning on, or after, 1st January 2015, so December’s year-end accounts are the first to be prepared under the new scheme. To help with this process and provide our support, we have compiled our five top tips for staying compliant with FRS 101/102:
1. Select the right accounting framework
Your first priority should be to evaluate the best choice of accounting framework for your company, bearing in mind future expected organisational changes such as listing or buying a subsidiary. The transition to a new reporting framework will require a significant investment, so wherever possible it is best to avoid having to change your framework again in the next few years. Lastly, if you are transitioning companies within a group at the same time, embrace the opportunity to streamline and simplify your accounting structure and choose a framework that enables you to do this.
2. Review your accounting templates
The new standards will require changes in some standard accounting templates, so it’s important you review your current templates. Profit and loss account and balance sheets will still be accepted, but the more detailed requirements have undergone changes along with other statements. For example, adjustments have been made to statements of total recognised gains and losses (STRGL) with additional statements now being required if those gains or losses are outside of profit.
Changes have also been made to the standard disclosures needed in the notes, so you will need to set up new templates for any new information. Furthermore, the new regulations require additional information not previously requested at all, making it essential that your IT systems are configured to run reports that include any new information.
3. Reporting errors and corrections
Reporting errors and issues will no doubt come to light as you perform the task of converting your accounts and since comparatives will be restated, we advise that you embrace the opportunity to straighten things out. FRS 101 and FRS /102 requires that errors found in the previous year’s figures are dealt with in the comparatives. If the previous year’s figures reported under the old GAAP included a correction in relation to an error in the year before that, then this will need to be restated for the first FRS 101 and FRS /102 accounts as errors must be dealt with retrospectively.
4. Ensure accuracy and keep on top of updates and amendments
As you prepare the new information required by the regulations it’s essential that your reports are set up correctly, and having the right processes and sofware in place is vital to guaranteeing complete accuracy in your reporting. Another important part of keeping your reports accurate is making sure you are up to date with any amendments or updates. Changes are being made frequently so we advise that you make the required changes as soon as new updates are rolled out.
5. How can you achive this?
By having the right software in place year on year you can produce fully compliant financial statements regardless of any changes to the accounting standards. The correct software not only will provide surplus benefits, but relieves the pressure of ensuring all changes have been implemented correctly, as any amendments and changes are rolled out in the latest product updates.
In addition, having a partner you can trust and lean on for support is invaluable, especially at a time like this when you’re getting to grips with new regulations.
To check your operations are compliant with FRS 101 or FRS 102, download our ‘CaseWare Guide to the New GAAP Standards’.