Changes to Company Financial Statements

With effect from accounting periods beginning on or after 1 January 2015 The Financial Reporting Council (FRC) will replace the current UK GAAP (Generally Accepted Accounting Practice) with FRS 102 The Financial Reporting Standard applicable in the UK.

FRS 102 is based on the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), and has been amended for use in the UK.

The introduction of FRS 102 will have a major impact on the financial statements of any entity currently preparing accounts under UK GAAP. The information below focuses on the major changes from current UK GAAP to FRS 102 for non-small companies.


A non-small company is a company which fails the following 2 out of 3 criteria two years in a row:

  • Turnover less than £10.2m for accounting periods commencing on or after 1 January 2016 (£6.5m previously)
  • Gross assets less than £5.1m also for accounting periods commencing on or after 1 January 2016 (£3.26m previously)
  • Average number of employees 50 or less (no change to previous level).


FRS 102 will lead to some changes to the format of your financial statements and the disclosures required, but most importantly for many there will be changes to the numbers as well. Compared to the current UK GAAP, FRS 102 will change the recognition criteria for assets and liabilities, the basis on which some items are measured and the handling of certain gains and losses.

Changes in these numbers may also effect things other than just the accounts. The calculations of profit and balance sheet measurements, for example, are changing which may, in turn, effect your loan covenant agreements.


To transfer to FRS 102 you will need to restate the opening balance sheet at the start of the comparative period for the first accounts prepared under FRS 102. This is known as the date of transition. So if, for example, a company prepares its first accounts under FRS 102 for the year ending 31 December 2015, its date of transition will be 1 January 2014.

Assets and liabilities at the accounting transition date will be identified, recognised and measure in line wit the requirements of the new standards and thereafter profits and losses will be recognised in accordance with the new standards. These may differ from those profits and losses that would have been reported had Current UK GAAP been retained.

Transition to FRS 102 will not only change the format of, and disclosures in, financial statements but will also alter:-

  • the criteria for recognition of some assets and liabilities
  • the measurement basis of some items
  • the treatment of some gains and losses.


A comparison of how financial statements are currently laid out and how they will appear in the future are summarised in the table below:

Balance sheet Statement of financial position
Cash flow statement Statement of cash flows
Profit and loss account Income statement
Statement of total recognised gains and losses Statement of comprehensive income
Reconciliation of movements in shareholders funds Statement of changes in equity


Asset / Liability Type UK GAAP FRS 102
Investments in Listed Shares Measured at cost or fair value Measured at fair value
Investment Property Revalued annually at open market value with the revaluation detailed in the statement of total recognised gains and losses Revalued annually at open market value with the revaluation detailed in the income statement
Basic Financial Instruments - such as long term trade debtors, long term trade creditors or simple long term bank loans Measured at cost or fair value Measured at cost or fair value as discounted to net present value
Other Financial Instruments - such as foreign exchange forward contracts or complex bank loans Not previously recognised Measured at fair value at each statement of financial position date with the revaluation detailed in the income statement
Intangible Assets and Goodwill Maximum useful life limited to 20 years unless a longer life can be justified Maximum useful life limited to 5 years unless a longer life can be justified & it will have a finite value
Lease Incentives - such as rent free periods Spread over period to first rent review Spread over the whole lease term
Deferred Tax Deferred tax not recognised on revalued properties Deferred tax recognised on revalued properties


The above information should only be considered as an introduction to the main fundamental changes that are taking place over the coming years. How these changes will affect your company will need to be considered on an individual company by company basis.

We will obviously assist you with any required changes as, and when, we prepare your forthcoming financial statements. If you wish to discuss any of the above changes then please contact your services director in the first instance.

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