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Section 6 – Overview
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
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Section Downloads
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Section 6: Notes to the Financial Statements
Summary
Section 6 details the notes which are required to be disclosed in the financial statements. It applies to all entities that are eligible as a micro entity and that choose to apply the micro companies/entities regime.
What is new?
Minimal notes to be included in the financial statements.
Once these notes have been included it is presumed that the financial statements show a true and fair view. No further consideration is required.
Notes to be included at the foot of the financial statements. Note however where an audit is being performed the Ethical Standards do not allow you to presume that it shows a true and fair view.
No requirement to include a director’s report.
Requirement to change wording in the auditor’s report where applicable given the reduced disclosure requirements.
What is different?
Disclosure of the fact that FRS 105 and the micro entities/companies regime has been applied must be included on the face of the balance sheet above the directors’ signature page. FRSSE, old GAAP or full FRS 102 did/does not require this. FRS 102 Section 1A does require a similar statement stating the Section 1A and the small companies/entities regime has been applied.
No requirement for a disclosure note in the financial statements detailing any transition adjustments from a previous GAAP to FRS 105.
No disclosure of directors remuneration or transactions required, other than loans/quasi loans/guarantees given to/for the benefit of directors and connected parties.
No requirement to disclose total wages and salaries or average number of employees as previously required under Companies Act.
No requirement to disclose details of investments held where a significant interest is held as previously required under company law.
For UK Only – No requirement to disclose accounting policies.
What are the key points?
Republic of Ireland
The required notes to the financial statements in the Republic of Ireland are:
| Details | Statutory reference |
| Directors report – no requirement to include same but can be included. | S.325 CA 2014 |
| Auditors report – as previously except:
– Delete references to the directors report where exemption claimed – Adjust references in auditors report with regard to matters required to report by exception as only S.307-308 of CA 2014 (disclosures with regard to loans/quasi loans given to directors or guarantees entered into for the benefit of directors apply). In the paragraph ‘Matters on which we are required to report by the Companies Act 2014’ delete the line ‘In our opinion the information given in the directors’ report is consistent with the financial statements‘ where this is not presented. |
S.336 & S.337 CA 2014 |
| Notes to the financial statements (note these should be included on the foot of the balance sheet) | |
| Disclosure of accounting policies. New requirement to
– disclose a change in accounting policy in the accounting policy section detailing the reason for the change for it and the impact of the change on the current and prior years. |
S.321 CA 2014 |
| Going concern disclosure (and basis if not prepared on a going concern). | Sch 3B(12) CA 2014 |
| Details of dividend paid/payable/declared split by amount included in accruals at the period end. | Sch 3B(33) CA 2014 |
| Departure from the requirements of Companies Act and FRS 105 to be disclosed | Sch 3B(19)) CA 2014 |
| Loans/quasi loans/ given to directors (inc. de facto & shadow) and any guarantees/credit transactions entered into for benefit of directors (Section 307-308);
• No need to disclose max amount O/s in year – instead disclose amount written off • Usual disclosures required with regard to balance at start and end of each year, movement, terms of arrangements, interest rate, names of directors, % of loan to net assets, repayments, and advances in the year etc. For guarantees; details of the arrangement entered into including value, an indication of the interest rate and any other relevant conditions Exemption from disclosure if the arrangements did not exceed €7,500 for any director or a connected party in the year. |
S.308-308 CA 2014 |
| Disclosure of holding of own shares or shares in holding company – detailing amount and nominal value by class and amount of profits restricted as a result to include the % of shares held to total shares in issue.
Investment in holding company shares should be disclosed in equity in the balance sheet as a deduction from capital and reserves. |
S.320 CA 2014 |
| Approval by directors on financial statements noting that they show a true and fair view. | S.324 CA 2014 |
| Acquisition or disposal of own shares disclosures –
– detail movement inc. balance at the beginning and end of each year – including details of shares acquired or held by subsidiary undertakings – number and nominal value of shares held by Co or Sub Co.’s – consideration paid for shares |
S.328 CA 2014 |
| Dividends paid/declared split by amounts included in accruals at period end. | Sch 3B(48) CA 2014 |
| Accruals for pension liabilities. | Sch 3B(35)(5) CA 2014 |
| Impairment/reversal of impairment on financial assets. | Sch 3B(23) CA 2014 |
| Prior period errors resulting in change in prior year presentation comparatives including the details of the adjustment and the reasons for it. | Sch 3B(5) CA 2014 |
| Change in presentation from the prior year including the details of the adjustment and the reasons for it. | Sch 3B(5) CA 2014 |
| Disclose change in accounting estimate, reason for same and impact. | Sch 3B(19) CA 2014 |
| Details of indebtedness – disclose:
– amount in total included in creditors where security is held, – type and nature of securities held. |
Sch 3B(34) CA 2014 |
| Detail useful life on goodwill and the reason for capitalisation and selecting useful life. | Sch 3B(25) CA 2014 |
| Disclose impairment/reversal of impairments on all fixed assets (Sch 3A (23(2). | Sch 3B(23)(2) CA 2014 |
| Details of guarantees and other financial commitments inc. contingencies. | Sch 3B(35) CA 2014 |
| Movement on profit and loss reserves inc.. transfers in and out to be disclosed if not shown on face of profit and loss account to include details of prior year adjustments, dividends etc. | Sch 3B(33) CA 2014 |
| Disclosure of presentational currency and level of rounding. | FRS 105 S3.13 |
| Name, legal form, registered office address, company registration number and if the company is being wound up. | S.291(3)(A) CA 2014 |
| Disclosure of guarantees/commitments/contingencies to be disclosed separately where they are for the benefit of the sub, parent sister companies or companies with which the company has a participating interest. | Sch 3B(35)(6) CA 2014 |
| Include note disclosing the fact the ES PASE was applied if that is the case. | ES PASE |
United Kingdom
The required notes to the financial statements in the UK are:
| Details | Statutory reference |
| Notes to the financial statements (note these should be included on the foot of the balance sheet) | |
| Loans/quasi loans/ given to directors (inc. de facto & shadow) and any guarantees/credit transactions entered into for benefit of directors;
• Usual disclosures required with regard to balance at start and end of each year, movement, terms of arrangements, interest rate, names of directors, repayments, and advances in the year, amounts written off and provided for etc. For guarantees; details of the arrangement entered into including value, an indication of the interest rate, the maximum liability that may be incurred and any amount paid and any liability incurred for the purpose of fulfilling the guarantee. |
S.413 CA 2006 |
| Accruals for pension liabilities included in the financial statements and any not included but committed to. | Sch 1(57)(3)(4) Small Companies Regulations |
| Details of indebtedness – disclose:
– amount in total included in creditors where security is held, – type and nature of securities held. |
Sch 1(57)(2) Small Companies Regulations |
| Details of guarantees and other financial commitments inc. contingencies. This includes aggregate amount for capital expenditure committed but not yet provided in the financial statements | Sch 1(57)(1)(3)
(4)(5) Small Companies Regulations |
| Disclosure of presentational currency and level of rounding including the name and the period covered. | FRS 105 S3.13 |
| Disclosure of guarantees/commitments/contingencies to be disclosed separately where they are for the benefit of the subsidiary, parent, sister companies or companies with which the company has a participating interest. | Sch 1(57)(6) Small Companies Regulations |
| Include note disclosing the fact the ES PASE was applied if that is the case. | ES PASE |
What do accountants need to do?
Be aware of the minimum disclosure requirements under FRS 105 so that the notes to financial statements are prepared in compliance with the standard.
Review their client listing to assess which companies can apply FRS 105 and plan the practice schedule accordingly. When reviewing the list assess whether companies which have assets held at fair value/revaluation will meet the requirements of a micro company once these revaluations/fair values have been stripped out.
Advise clients of the fundamental changes required as soon as possible and meet with the clients to discuss FRS 105 so that the client can determine if they would favour the use of FRS 105 as opposed to FRS 102.
Advise clients of the non- necessity to disclose directors remuneration, employees costs and numbers and transactions with directors (other than loans, guarantees entered into for the benefit of directors and connected persons) if FRS 105 is applied.
Advices clients of the Issues to consider when deciding whether to apply FRS 105 or not assuming the company is eligible to utilise FRS 105 some of those being:
- If the company increases in size the company will then no longer meet the requirements of the micro companies regime and as a result will have to go through the pain of transitioning to a new accounting standard all over again;
- Given the simplicity of the financial statements, for an external party reviewing these financial statements, they may not provide enough detail e.g. banks, potential customers.
- The company’s balance sheet only shows cost and does not allow entities to show fair values.
- Does the company wish to capitalise development costs, if so FRS 105 should not be utilised (some companies do)?
- If the results are included in the parent company consolidated financial statements, FRS 105 financial statements cannot be prepared.
- The balance sheet of the company may be significantly impacted as a result of a revaluation policy not being permitted. Possibility it could impact banking covenants.
- What are the growth prospects for the company? If the company expects to grow significantly then it may be better to apply FRS 102 from the outset.
What do companies need to do?
Be aware of the minimum disclosure requirements under FRS 105 so that the notes to financial statements are prepared in compliance with the standard.
Assess whether FRS 105 can be applied and if it can assess whether it is appropriate for the company.
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