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Changes to UK GAAP

Are you ready?

The biggest change to UK

GAAP (generally accepted

accounting principles) was

broadly completed in March

this year with the introduction

of Financial Reporting Standard

102 (FRS 102).

July 2013

FRS 102 is the third o three new standards which will orm the bulk o UK GAAP. FRS 102 is

expected to be the standard o choice or most unquoted large and medium sized companies.

The rules or determining a company’s size are quite complicated but typically it will be those

which exceed more than one o the ollowing criteria: turnover £6.5m per annum, total assets o

£3.26m and 50 employees.

But what does all of this mean for businesses and how should they make sure

they are ready to deal with the impact of FRS 102?

In summary – almost all o the current accounting standards are being replaced by FRS 102

largely because existing UK accounting standards have become dated, unwieldy and increasingly

struggle to meet all o the needs o the users o accounts. In addition, or a number o years,

there has been a programme o converging UK GAAP with International Financial Reporting

Standards (IFRS) and whilst those rameworks are still not ully aligned, the introduction o FRS

102 is a great leap orward in that respect.

Whilst the new standard can be adopted early it is mandatory or accounting periods

commencing on or ater 1 January 2015.Typically those companies caught in the frst wave o

mandatory adoption will be those preparing accounts or the year ending 31 December 2015.

However, since accounts must include comparative inormation companies really need to be

ready or the new standards rom 1 January 2014. This is is eectively the ‘D Day’ or companies

adopting FRS 102 and requires action and planning ar earlier than the headline eective date

might suggest.

Experience has shown than many companies operate on the premise o putting o apparently

non-essential changes until the last minute but in this case being prepared and speaking to

accountants and auditors now willallow them to make reasoned and considered decisions

and take advantage o genuine planning opportunities on transition to FRS 102. . When quoted

businesses moved over to International Accounting Standards in 2005, many seriously

underestimated the task at hand resulting in dedicating signifcant time and resource at the

last minute to ensure that they were compliant. We are trying to help businesses avoid a similar

situation arising with the transition to FRS 102.

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For further information please contact your local RSM Tenon advisor

who will be able to provide you with further information.

www.rsmtenon.com

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and consulting frms each o which practices in its own right. RSM International is the brand used by the net work which is not itsel a separate legal entity in any jurisdiction. RSM Tenon Limited (No 4066924) is

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A consequence o the adoption o FRS 102 is reported profts may change which could impact

upon an company’s ability to pay dividends.

Another critical actor to consider concerns banking covenants which would have been drated

on the basis o being tested against accounts prepared under current and soon to be superseded

UK GAAP. Without action adoption o FRS 102 may cause a breach o banking covenants which

could be avoided i the impact o FRS 102 adoption is assessed beorehand and covenants re-

negotiated beore a breach occurs.

With a wealth o things to consider, RSM Tenon is staging a number o advisory events to help

businesses get up to speed with the changes, including practical advice and guidance on how

and when they should prepare.

Please contact your local RSM Tenon ofce or urther inormation.