The most radical overhaul of accounting standards in the UK since the early 1980s is now complete and UK Generally Accepted Accounting Practice (UK GAAP) has changed completely.
The background and framework for the new UK GAAP are set out in Financial Reporting Standard 100 (FRS 100). The other standards that have been issued are:
The Financial Reporting Standards for Smaller Entities (FRSSE) remains in place but has been updated to reflect some of the changes introduced by FRS 102.
The 11 Statements of Recommended Practice (SORPs) have been reviewed and although some have been withdrawn the majority have been updated for the new regime and re-issued.
The new framework is mandatory for financial years commencing on or after 1 January 2015, and the prior period results will need to be restated upon first time adoption. Companies should start planning for the transition now to ensure it is done in the most efficient manner possible.
Corporate entities in the UK (except charities) have a choice of accounting framework to use for their statutory financial statements. The Companies Act 2006 specifies this as being ‘International Accounting Standards’, i.e. IFRS, or Companies Act accounts, being UK GAAP.
UK GAAP will now have three components:
Companies are allowed to move between accounting frameworks (i.e. between IFRS and UK GAAP or vice versa) no more than once every five years. This represents a change to the previous practice, where the adoption of IFRS was, effectively, a permanent change with some exceptions for specified circumstances.
Accordingly, some companies (including parent entities within listed groups) now have the option of moving back to UK GAAP.
To plan for the proposed changes, you should consider:
Companies which are listed on the London Stock Exchange or AIM are required to prepare consolidated financial statements using IFRS.The directors retain a choice as to whether to use UK GAAP or IFRS for the parent company’s entity accounts and for the accounts of subsidiary companies.
The Companies Act 2006 requires directors of parent companies that prepare group accounts to ensure that all UK entities in the group prepare financial statements using a common accounting framework, although there are some choices:
Under the new regime, the options available to the directors of parent entities that prepare group accounts are:
All the options for listed companies are available as well as: