Section 1 – Appendix B to Section 1A – Guidance on Adopting the Profit and Loss Account Format

[et_pb_section admin_label=”Header – All Pages” global_module=”1221″ transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” custom_padding=”||0px|”][et_pb_row global_parent=”1221″ admin_label=”row”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ admin_label=”Post Title” title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” title_all_caps=”off” use_border_color=”off” border_color=”#ffffff” border_style=”solid” title_font=”|on|||” title_font_size=”35″ custom_padding=”10px|||”] [/et_pb_post_title][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” global_module=”1228″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”0px||0px|” padding_mobile=”on” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row global_parent=”1228″ admin_label=”Row” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”0px||0px|” padding_mobile=”off” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ admin_label=”Text” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [breadcrumb] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_button admin_label=”Return to Main Index” button_url=”https://ie.frs102.com/members/premium-toolkit/” url_new_window=”off” button_text=”Return to Main Index” button_alignment=”center” background_layout=”dark” custom_button=”on” button_bg_color=”#1e73be” button_border_radius=”7″ button_letter_spacing=”0″ button_use_icon=”default” button_icon_placement=”right” button_on_hover=”on” button_letter_spacing_hover=”0″] [/et_pb_button][/et_pb_column][et_pb_column type=”1_2″][et_pb_button admin_label=”Return to Section 1 Home” button_url=”https://ie.frs102.com/members/premium-toolkit/section-1/” url_new_window=”off” button_text=”Return to Section 1 Home” button_alignment=”center” background_layout=”dark” custom_button=”on” button_bg_color=”#1e73be” button_border_radius=”7″ button_letter_spacing=”0″ button_use_icon=”default” button_icon_placement=”right” button_on_hover=”on” button_letter_spacing_hover=”0″] [/et_pb_button][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” use_border_color=”off” border_color=”#ffffff” border_style=”solid” module_id=” “]

Appendix B to Section 1A

Guidance on adapting the profit and loss account formats

Extract from FRS102: Section 1AB.1

1AB.1 As set out in paragraph 1A.14 a small entity shall present its profit or loss for a period in an income statement in accordance with the requirements for a profit and loss account set out in either Part 1 General Rules and Formats of Schedule 1 to the Small Companies Regulations or Part 1 General Rules and Formats of Schedule 1 to the Small LLP Regulations. This  results in three alternatives:

1. apply the required profit and loss account formats as set out in legislation (subject to any permitted flexibility);
2. draw up an abridged profit and loss account (see paragraph 1AB.2); or
3. adapt one of the profit and loss account formats (see paragraphs 1AB.3 and 4).

OmniPro comment

See example of format 1 and format 2 below showing the application of (a) above.

Format 1 (15)

1. Turnover

2. Cost of sales

3. Gross profit or loss

4. Distribution costs

5. Administrative expenses

6. Other operating income

7. Income from shares in group undertakings

8. Income from participating interests

9. Income from other fixed asset investments

10. Other interest receivable and similar income

11. Amounts written off investments

12. Interest payable and similar expenses

13. Tax on profit or loss

14. Profit or loss after taxation

15. Other taxes not shown under the above items

16. Profit or loss for the financial year (14)

 

Format 2

1. Turnover

2. Variation in stocks of finished goods and in work in progress

3. Own work capitalised

4. Other operating income

5. (a) Raw materials and consumables

(b) Other external expenses

6. Staff costs:

1. Wages and salaries
2. Social insurance costs
3. Other pension costs

7. (a) Depreciation and other amounts written off tangible and intangible fixed assets

(b) Amounts written off current assets to the extent they exceed value adjustments that are normal in the undertaking concerned

8. Other operating expenses

9. Income from shares in group undertakings

10. Income from participating interests

11. Income from other fixed asset investments

12. Other interest receivable and similar income

13. Amounts written off investments

14. Interest payable and similar expenses

15. Tax on profit or loss
16. 16.Profit or loss after taxation

17. Other taxes not shown under the above items

18. Profit or loss for the financial year

See below the format and requirements for format 1. You will note there are no notes included for certain items as they are not required under the small companies regime. Example of disclosure notes which are required have been included in Appendix C&D below.

 

Two statement approach for an individual entity (i.e. not group accounts)
Profit and Loss Account
For the Year Ended 31 December 2015
	Notes	2015	2014
		CU	CU
Turnover		XXXXX	XXXXX
Cost of sales		(XXXX)	(XXXX)
Gross profit		XXXX	XXXX
Selling and distribution costs		(XXX)	(XXX)
Administrative expenses		(XXX)	(XXX)
Other operating income		XXX	XXX
Operating profit	1	XXX	XXX
Income from shares in group undertakings		XXX	XXX
Income from other financial assets		XXX	XXX
Income from shares in participating interests		XXX	XXX
Profit before interest and taxation		XXXX	XXXX
Interest receivable and similar income		XXX	XXX
Interest payable and similar expenses		(XXX)	(XXX)
Profit before taxation		XXXX	XXXX
Tax on profit		(XXX)	(XXX)
Profit for the financial year		1,000,000	500,000

 

Profit for the financial year attributable to:
Owners of the parent company	1,000,000	500,000
	1,000,000	500,000

 NOTE:  the below is encouraged to be provided where items have been posted to other comprehensive income

 Separate page in the financial statements include: Statement of Comprehensive Income

Profit for the financial year	1,000,000	500,000
Cash flow hedges
–     effective portion of changes in fair value to cash flow hedges	XXX	XXX
–     fair value of cash flow hedges transferred to income statement	XXX	XXX
Actuarial loss in respect of the defined pension scheme	(XXX)	(XXX)
Gain/(loss) on revaluation of intangible assets	XXX	(XXX)
Gain/(loss) on revaluation of property, plant and equipment	XXX	(XXX)
Gain/(loss) on revaluation of subsidiaries, associates, etc.	XXX	(XXX)
Deferred tax on components of other comprehensive income	XXX	XXX
Total other comprehensive income for the year net of tax	200,000	(100,000)
Total comprehensive income for the year	1,200,000	400,000

 

Total comprehensive income for the financial year attributable to:
Owners of the parent company	XXX	XXX
	1,200,000	400,000

Further disclosures may be required in order for the accounts to show a true and fair value The disclosures stated in Appendix C of Section 1A where relevant to the profit and loss must be disclosed namely (also disclosure in Appendix D is also encouraged):

• Fair value movements posted to the profit and loss

• Treatment for taxation purposes of amounts posted to the revaluation reserve

• Cash flow hedge/fair value hedge reserve detailing amounts at the beginning and end of the period and the taxation effect of the postings (movement into and out of the reserve in the period)

• Detail of movement in the profit and loss reserves to include detail of transfers between reserves

• Related party transactions that have not been conducted under normal market conditions (other than those with 100% owned group companies)

• Directors remuneration and dividend paid to directors

• Name and registered office of the undertaking drawing up the lowest level of consolidated financial statements in which the entity is included if applicable including the place of business

• Disclosure of exceptional items in line with Section 5 (See section 5 for further details).

• Average number of employees employed during the year

• Impairment and reversal of impairments of all types of fixed assets

• Interest charged on group loans shown separately from other interest;

• Preference dividend recognised in interest cost.

• Disclosure of prior period adjustments in the profit and loss account

• Statement of comprehensive income where amounts recognised in OCI (encouraged under Section 1A)

• Transaction note where adjustment arise (encouraged under Appendix D)

Note Section 1A requires a small entity to provide any additional disclosure that is necessary for the financial statements to show a true and fair view in the notes to the financial statements, for example in relation to disaggregating gross profit or loss and disclosing turnover.

 Abridged Profit and Loss Account

Extract from FRS102: Section 1AB.2

1AB.2 A small entity choosing to apply paragraph 1A(2) of Schedule 1 to the Small Companies Regulations and draw up an abridged profit and loss account must still meet the requirement for the financial statements to give a true and fair view. A small entity shall therefore also consider the requirements of paragraph 1A.16 and provide any additional disclosure that is necessary in the notes to the financial statements, for example in relation to disaggregating gross profit or loss and disclosing turnover.

OmniPro comment

Note the above requirements are the minimum and further disclosures may be required to disclose a true and fair view. Note the only difference between this method and the previous method is that the profit and loss starts off at gross profit. The disclosures stated in Appendix C of Section 1A where relevant to the profit and loss must be disclosed namely:

• Fair value movements posted to the profit and loss

• Treatment for taxation purposes of amounts posted to the revaluation reserve

• Cash flow hedge/fair value hedge reserve detailing amounts at the beginning and end of the period and the taxation effect of the postings (movement into and out of the reserve in the period)

• Detail of movement in the profit and loss reserves to include detail of transfers between reserves

• Related party transactions that have not been conducted under normal market conditions (other than those with 100% owned group companies)

• Directors remuneration and dividend paid to directors

• Name and registered office of the undertaking drawing up the lowest level of consolidated financial statements in which the entity is included if applicable including the place of business

• Disclosure of exceptional items in line with Section 5 (See section 5 for further details).

• Average number of employees employed during the year

• Impairment and reversal of impairments of all types of fixed assets

• Interest charged on group loans shown separately from other interest;

• Preference dividend recognised in interest cost.

• Disclosure of prior period adjustments in the profit and loss account

• Statement of comprehensive income where amounts recognised in OCI (encouraged under Section 1A)

• Transaction note where adjustment arise (encouraged under Appendix D)

In order for the abridged profit and loss format to be used it must be approved by all members. The abridged profit and loss account starts from the gross profit line.

Note Section 1A requires a small entity to provide any additional disclosure that is necessary for the financial statements to show a true and fair view in the notes to the financial statements, for example in relation to disaggregating gross profit or loss and disclosing turnover.

Hence in format 1, turnover, cost of sales and other operating income does not have to be disclosed in the profit and loss.

Hence in format 2, turnover, raw materials and consumables and other external charges do not have to be disclosed in the profit and loss.

See example below

Profit and Loss Account
For the Year Ended 31 December 2015	Notes	2015		2014
		CU		CU
Gross profit		XXXX		XXXX
Selling and distribution costs		(XXX)		(XXX)
Administrative expenses		(XXX)		(XXX)
Operating profit	3	XXX		XXX
Income from shares in group undertakings		XXX		XXX
Income from shares in other fixed assets		XXX		XXX
investments Income from shares in participating interests		XXX		XXX
Profit before interest and taxation		XXXX		XXXX
Interest receivable and similar income		XXX		XXX
Interest payable and similar income		(XXX)		(XXX)

 

Profit before taxation	XXXX	XXXX
Tax on profit	(XXX)	(XXX)
Profit for the financial year	1,000,000	500,000
Profit for the financial year attributable to:
Owners of the parent company	1,000,000	500,000
	1,000,000	500,000

Adapted Profit and Loss Account

Extract from FRS102: Section 1AB.3-1AB.4

1AB.3 A small entity choosing to apply paragraph 1B(2) of Schedule 1 to the Small Companies Regulations and adapt one of the profit and loss account formats shall, as a minimum, include in its income statement line items that present the following amounts for the period:

1. revenue;
2. finance costs;
3. share of the profit or loss of investments in associates (see Section 14 Investments in Associates) and jointly controlled entities (see Section 15 Investments in Joint Ventures)
4. accounted for using the equity method;
5. profit or loss before taxation;
6. tax expense excluding tax allocated to other comprehensive income or equity; and
7. profit or

1AB.4 A small entity may include additional line items in the income statement and it amends the descriptions used in paragraph 1AB.3, and the ordering of items, when this is necessary to explain the elements of financial performance, providing the information given is at least equivalent to that required by the profit and loss account format had it not been adapted.

OmniPro comment

The above gives an entity the option to lay the profit and loss account/income statement in line with IFRS requirements.

Other than the format of the income statement, the below items also differ from an entity that chooses to prepare the abridged profit and loss:

• Requirement to disclose turnover and cost of sales

See below an example of the proposed disclosure with the references to the notes where further disclosures are required. Note the minimum disclosures in Appendix C and D are also required. The layout is the only thing that differs from the other two formats.

 

Statement of Comprehensive Income
For the Year Ended 31 December 2015
	Notes	2015		2014
		CU		CU
Revenue		XXXXX		XXXXX
Cost of sales		(XXXX)		(XXXX)
Gross profit		XXXX		XXXX
Selling and distribution costs		(XXX)		(XXX)
Administrative expenses		(XXX)		(XXX)
Other operating income		XXX		XXX
Group operating profit	1	XXX		XXX
Share of profit in associates		XXX		XXX
Share of profit in joint venture		XXX		XXX
Profit before interest and taxation		XXXX		XXXX
Finance income		XXX		XXX
Finance costs	2	(XXX)		(XXX)
Profit before taxation		XXXX		XXXX
Tax on profit		(XXX)		(XXX)
Profit for the year		1,000,000		500,000
Other Comprehensive Income (encouraged to be disclosed where transactions are ported to OCI) Cash Flow Hedge
–     effective portion of changes in fair value to cash flow hedges			XXX	XXX
–     fair value of cash flow hedges transferred to income statement			XXX	XXX
Actuarial loss in respect of the defined pension scheme			(XXX)	(XXX)
Share of other comprehensive income of associates			XXX	(XXX)
Share of other comprehensive income of joint controlled entities			XXX	(XXX)
Gain/(loss) on revaluation of intangible assets			XXX	(XXX)
Gain/(loss) on revaluation of property, plant and equipment			XXX	(XXX)
Gain/(loss) on revaluation of subsidiaries, associates, etc.			XXX	(XXX)
Deferred tax on components of other comprehensive income			XXX	XXX
Total other comprehensive income for the year net of tax			200,000	(100,000)
Total comprehensive income for the year			1,200,000	400,000

 

Total comprehensive income for the financial year attributable to:
Owners of the parent company	1,200,000	400,000
	1,200,000	400,000
Profit for the financial year attributable to:
Owners of the parent company	1,000,000	400,000

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]