United Kingdom

Details

  • Industry: Financial Services
  • Type: Press release
  • Date: 14/03/2013

UK accounting finally closes the GAAP 

 
  • Time to start planning for change, says KPMG

 

KPMG in the UK welcomes the issue of the Financial Reporting Council’s (FRC’s) Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102), the IFRS-based standard that will replace current UK GAAP. 

 

FRS 102 is the last main piece of the jigsaw in the FRC’s new financial reporting regime, following the issue of FRSs 100 Application of Financial Reporting Requirements and 101 Reduced Disclosure Framework last year. (Specialist rules for insurers are still to come.) The new regime will require current UK GAAP adopters to choose between EU-IFRS accounting and FRS 102’s IFRS-based framework for accounting periods starting on or after 1 January 2015. 

 

FRS 102 is an IFRS-based framework but, with a view to simplification for the preparer, includes some significant accounting differences from EU-IFRS, for example requiring the amortisation of goodwill and permitting the expensing of borrowing and development costs. 

 

The new standard includes a reduced disclosure regime which will allow the individual accounts of parents and subsidiaries to omit certain disclosures when, among other conditions, the entity is included in publicly available consolidated financial statements (‘qualifying entities’); such exemptions are significant and include cash flow statements, certain group share-based payment disclosures and (unless the qualifying entity is a financial institution) information about financial instruments.  These are similar to the disclosure exemptions in FRS 101, available to qualifying entities otherwise using the recognition and measurement approach of EU-IFRS. 

 

Nick Chandler, UK Head of Accounting Advisory Services at KPMG, commented: “It has been some time coming but we now have certainty over what the accounting framework will look like for current UK GAAP adopters in 2015.  Groups will now seek to evaluate which accounting framework is right for their subsidiaries – EU-IFRS recognition and measurement or FRS 102.” 

 

Under the new regime groups will be able to pick and choose on a subsidiary-by-subsidiary basis whether to apply FRS 101 (EU-IFRS accounting with reduced disclosure) or FRS 102.

 

This choice will need to be made in time for the 2015 financial statements, although FRS 102 can be early-adopted for 31 December 2012 year-ends onwards and FRS 101 also for earlier year ends.  Adoption in 2015 will require the restatement of comparatives for 2014 and the preparation of a transition balance sheet at the start of the 2014 financial year. 

 

Nick Chandler continued: “Changing the basis of accounting for company financial statements may have wide-ranging effects, including impacts on taxation, distributable reserves, debt covenants, remuneration schemes and systems.  The ability to pick and choose the accounting framework on a subsidiary-by-subsidiary basis will be important in allowing companies to mitigate the impact of such effects – choosing the right accounting framework for each company”. 

 

Andrew Vials, senior technical partner at KPMG UK, added:  “It is helpful that the regime is available for early adoption, although we would expect preparers to take a considered view and plan carefully for the change – making sure they understand all the potential effects.  However, with the transition date for December year ends less than a year away this is clearly something entities need to start planning for now.” 

 

-ends-

 

Media enquiries to:

 

Mark Hamilton, KPMG Press Office: mark.hamilton@kpmg.co.uk

Tel: 020 7694 2687

 

About KPMG

 

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 12,000 partners and staff.  The UK firm recorded a turnover of £1.8 billion in the year ended September 2012. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 156 countries and have 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  KPMG International provides no client services.

 

 

Share this

Share this