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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ 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″ custom_padding_tablet=”0px||0px|” custom_padding_last_edited=”on|desktop” prev_background_color=”#1e73be” next_background_color=”#000000″][et_pb_row][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.105″ title=”Section 1A – Index” open=”off”]
1A.1.1 Extract from FRS102: Section 1A.1-1A.4
1A.2.1 Section 1A – As applicable to the republic of Ireland
1A.2.1.2 Which companies can avail of Section 1A/Small Company’s regime?
1A.2.1.3 What remains the same?
1A.2.2 Section 1A and UK Companies
1A2.3 Choice to apply section 1A of FRS 102
1A.3.1 Extract from FRS102: Section 1A.5-.1A.6
1A.3.2 OmniPro comment – True and fair view
1A.4 Complete set of financial statements of a small entity
1A.4.1 Extract from FRS102: Section 1A.7-1A.11, Section 1AD.1 and Section 1A.16-1A.20
1A.4.2.1 What Section 1 means in practical terms?
1A.4.2.2 The minimum disclosure requirements and the requirements to still show a true and fair view
1A.4.2.3 Disclosure encouraged under S.1A
1A.4.2.4 Formats of Balance Sheet and profit and Loss Account
1A5 Information to be presented in the statement of financial position
1A5.1 Extract from FRS102: Section 1A.12-1A.13
1A6 Information to be presented in the income statement
1A6.1 Extract from FRS102: Section 1A.14-1A.15
1A7 Voluntary preparation of consolidated financial statements
1A7.1 Extract from FRS102: Section 1A.21-1A.22
1A8.1.1 Guidance on adapting the balance sheet formats
1A8.1.1.1 Extract from FRS102: Section 1AA.1
1A8.1.1.2.2 Required formats for entities
1A8.1.1.2.2.2 Format 1 – Balance sheet – set out in legislation – Schedule 3A
1A8.1.1.2.2.3: Format 2 – balance sheet – set out in legislation – Schedule 3A
1A8.1.1.2.2.4 Example – Format 1 – Balance sheet – practical application
1A8.1.1.2.2.5 Notes required to balance sheet
1A8.2.1 Abridged balance sheet
1A8.2.1.1 Extract from FRS102: Section 1AA.2
1A8.3.1.1 Extract from FRS102: Section 1AA.3-1AA.6
1A8.3.1.2.2 Example adapted/IFRS layout – Balance sheet
1A9.1.1 Guidance on adapting the profit and loss account formats
1A9.1.1.1 Extract from FRS102: Section 1AB.1
1A9.1.1.2.2 Application of format 1 profit and loss account set out in legislation
1A9.1.1.2.3 Application of format 2 – profit and loss account set out in legislation
1A9.1.1.2.4 Example format 1 – profit and loss account.
1A9.1.1.2.5 Notes required to profit and loss account at a minimum
1A9.9.1.2.5.1 Consolidated profit and loss note requirements
1A9.2 Abridged Profit and Loss Account
1A9.2.1 Extract from FRS102: Section 1AB.2
1A9.3 Adapted Profit and Loss Account
1A9.3.1 Extract from FRS102: Section 1AB.3-1AB.4
1A9.3.2.2: Example adapted/IFRS layout on the profit and loss accounts
1AC10 Appendix C to Section 1A (Applicable for UK entities)
1AC10.1 Disclosure requirements for small entities
1AC10.1.1 Extract from FRS102: Section 1AC.1-1AC.2
1A10.1.2.2 What entities must comply with Appendix C
1AC10.2.1 Extract from FRS102: Section 1AC.3-1AC.
1AC10.2.2.1.1 Accounting police disclosure
1AC10.2.2.1.1.2 Basis of preparation
1AC10.2.2.1.1.4 Basis of consolidation (if applicable)
1AC10.2.2.1.4.1 Subsidiary undertakings
1AC10.2.2.1.1.4.2 Associates and joint ventures
1AC10.2.2.1.1.5 Business combinations and goodwill [if applicable]
1AC10.2.2.1.1.8 Intangible assets
1AC10.2.2.1.1.9 Contingent acquisition consideration
1AC10.2.2.1.1.10 Financial assets
1AC10.2.2.1.1.11 General turnover accounting policy notes
1AC10.2.2.1.1.11.2 Turnover accounting policy for an insurance broker Turnover – commission income
1AC10.2.2.1.1.11.4 Turnover accounting policy note where turnover is derived from investments
1AC.10.2.2.1.1.11.5 Turnover accounting policy for a software
1AC10.2.2.1.1.11.6 Turnover accounting policy for a construction company
1AC10.2.2.1.1.12 Government grants
1AC10.2.2.1.1.12.1 Accruals model
1AC10.2.2.1.1.12.2 Performance model
1AC10.2.2.1.1.13 Dividend income
1AC10.2.2.1.1.14 Dividend distribution
1AC10.2.2.1.1.16 Financial instruments
1AC10.2.2.1.1.16.1 Trade and other debtors
1AC10.2.2.1.1.16.2 Cash and cash equivalents.
1AC10.2.2.1.1.16.3 Other financial assets.
1AC10.2.2.1.1.16.4 Trade and other creditors.
1AC10.2.2.1.1.16.7 Offsetting financial instruments.
1AC10.2.2.1.1.17 Compound financial instruments.
1AC10.2.2.1.1.19 Hedge accounting
1AC10.2.2.1.1.20.1 Environmental liabilities
1AC10.2.2.1.1.20.2 Closure costs
1AC10.2.2.1.1.21 Contingencies
1AC10.2.2.1.1.22 Employee Benefits
1AC10.2.2.1.1.23 Preference share capital
1AC10.2.2.1.1.24 Share capital
1AC10.2.2.1.1.25 Related party transactions
1AC10.2.2.1.1.26 Interest income
1AC10.2.2.1.1.28 Tangible fixed assets
1AC10.2.2.1.1.30 Investment properties
1AC10.2.2.1.1.31.1 Finance leases
1AC10.2.2.1.1.31.2 Operating leases
1AC10.2.2.1.1.31.3 Lease incentives
1AC10.2.2.1.1.32 Leasing company accounting policy
1AC10.2.2.1.1.33 Intangible assets
1AC10.2.2.1.1.35 Exceptional items
1AC10.2.2.1.1.36 Share based costs
1AC10.2.2.1.1.37 Investment properties
1AC10.2.2.1.1.38 Biological assets (where fair value is used)
1AC10.2.2.1.1.39 Biological assets – Livestock (where fair value model is adopted)
1AC10.2.2.1.1.40 Biological assets – Forestry (where cost model is adopted)
1AC10.2.2.1.1.41 Biological assets – Livestock (where cost model is adopted)
1AC10.3 Changes in presentation and accounting policies and corrections of prior period errors
1AC10.3.1 Extract from FRS102: Section 1AC.7-1AC.9
1AC10.3.2.2. Prior period adjustment disclosure
1AC10.3.2.2.1 Option 1 – Analysis of prior period adjustments
1AC10.3.2.2.2 Option 2: Analysis of prior period adjustments
1AC10.3.2.2.2.3 Profit and Loss reserves note/statement of changes in equity
1AC10.3.2.2.3 Statement in changes in equity note – prior period error/change in accounting policy
1AC10.3.2.2.4 Illustration of change in accounting policy disclosure
1AC10.3.2.2.4.1 Example extract of a change in accounting policy disclosure
1AD11.3.2.5 Change in classification from prior period
1AC10.4 True and fair override
1AC10.4.1 Extract from FRS102: Section 1AC.10
1AC10.5 Notes supporting the statement of financial position
1AC10.5.1 Extract from FRS102: Section 1AC.11-1AC.19
1AC10.5.2.1 Property, plant and equipment/tangible fixed assets. Including revaluation
1AC 10.5.2.1.1 Borrowing costs
1AC10.5.2.2 Intangible assets including revaulation
1AC10.5.2.4 Illustration of the revaluation reserve disclosures.
1AC10.5.2.5 Investment properties note
1AC10.5.2.6 Alternative layout for the investments note and illustration of financial assets
1AC10.6 Details of indebtness and securities held (if any) 91
1AC10.6.2 Extract from FRS 102: Section 1AC.27
1AC10.7.1 Extract from FRS102: Section 1AC.20-1AC.21
1AC10.8 Fair value measurement
1AC10.8.1 Extract from FRS102: Section 1AC.22-Section 1AC.24 and section 1AC.26
1AC10.8.2.2 Extract from the notes to the financial statements – note on investment property
1AC10.8.2.3 Investment note with investment in subsidiary, joint ventures and other investments
1AC10.8.2.4 Extract of notes to the financial statements – Financial instruments note disclosures
1AC10.8.2.4.1 Extract of notes to the financial statements – Interest receivable and similar income
1AC 8.2.4.2 Extract of notes to the financial statements – interest payable and similar expenses
1AC10.8.2.4.3 Alternative disclosure for profit and loss
1AC10.8.2.4.4 Extract from other comprehensive income showing activity on cash flow hedges:
1AC10.8.2.4.4.1 Cash flow fair value hedge reserve disclosure requirements:
1AC10.9 Indebtedness, guarantees and financial commitments
1AC10.9.1 Extract from FRS102: Section 1AC.27-1AC.31
1AC10.9.2.2 Contingencies note
1AC10.9.2.3 Off-balance sheet arrangements note (section 1AC.31 od Appendix C of FRS 102)
1AC10.9.2.4 Commitments notes (section 1AC.31 of Appendix C of FRS 102)
1AC10.9.2.5 Indebtness note and security disclosures
1AC10.10 Notes supporting the income statement / profit and loss accounts
1AC10.10.1 Extract from FRS102: Section 1AC.32-1AC.33
1AC10.10.2.2 Extract to show required profit and loss disclosures
1AC10.10.2.2.1 Exceptional item defined and the disclosure requirements
1AC10.10.2.2.2 Exceptional item disclosure
1AC10.10.2.3 Employee numbers disclosure:
1AC10.10.2.4 Other profit and loss disclosures
1AC10.11 Related party disclosures
1AC10.11.1 Extract from FRS102: Section 1AC.34-1AC.36
1AC10.11.2.1.1 Related party defined
1AC10.11.2.2 Related party note – with related entities
1AC10.11.2.3 Loans, guarantees, credit transactions entered into the benefit of directors
1AC10.11.2.4 Directors remuneration
1AC10.11.7 Controlling Party disclosure
1AC10.12.1 Extract from FRS102: Section 1AC.37-1AC.39
1AC10.12.2.1 Disclosures required describing the entity
1AC10.12.2.2 Post balance sheet events
1AC10.13.1 Auditors remuneration, Interest income or expense from loans to and from group entities
1AC10.13.1.1 Interest income or expense from loans to and from group entities
1AC10.13.1.2 Auditors remuneration
1AC10.13.2 Debtors and Creditors Note as required by Formats
1AC10.13.3 Share capital disclosures
1AD11 Appendix D to Section 1A (applicable for Republic of Ireland entities only)
1AD11.1 Disclosure requirements for small entities in the Republic of Ireland
1AD11.1.1 Extract from FRS102: Section 1AD.1-1AD.2
1A11.1.2.1 Summary section 1A disclosure checklist
1AD11.2.1 Extract from FRS102: Section 1AD.3-1AD.6
1AD11.2.2.1.1 General information
1AD11.2.2.1.2 Basis of preparation
1AD11.2.2.1.3 Consolidation exemption
1AD11.2.2.1.4 Basis of consolidation – (If Applicable)
1AD11.2.2.1.4.1 Subsidiary undertakings
1AD11.2.2.1.4.2 Associates and joint ventures
1AD11.2.2.1.4.3 Transactions eliminated on consolidation
1AD11.2.2.1.5 Business combinations and goodwill
1AD11.2.2.1.8 Intangible assets
1AD11.2.2.1.9 Contingent acquisition consideration
1AD11.2.2.1.10 Financial assets
1AD11.2.2.1.11.1 General turnover accounting policy notes
1AD11.2.2.11.2 Turnover accounting policy for an insurance broker
1AD11.2.2.11.4 Turnover accounting policy note where turnover is derived from investments Turnover
1AD11.2.2.11.5 Turnover accounting policy for a software company
1AD11.2.2.11.6 Turnover accounting policy for a construction company
1AD11.2.2.12 Government grants
1AD11.2.2.12.2 Performance model
1AD11.2.2.14 Dividend distribution
1AD11.2.2.16 Financial instruments
1AD11.2.2.16.1 Trade and other debtors
1AD11.2.2.16.2 Cash and cash equivalents.
1AD11.2.2.16.3 Other financial assets.
1AD11.2.2.16.4 Trade and other creditors.
1AD11.2.2.16.7 Offsetting financial instruments.
1AD11.2.2.17 Compound financial instruments.
1AD11.2.2.20.1 Environmental liabilities
1AD11.2.2.22 Employee Benefits
1AD11.2.2.23 Preference share capital
1AD11.2.2.25 Related party transactions
1AD11.2.2.28 Tangible fixed assets
1AD11.2.2.30 Investment properties
1AC10.2.2.1.1.31.1 Finance leases
1AD11.2.2.31.2 Operating leases
1AD11.2.2.31.3 Lease incentives
1AC10.2.2.1.1.32 Leasing company accounting policy
1AD11.2.2.33 Intangible assets
1AD11.2.2.35 Exceptional items
1AD11.2.2.36 Share based costs
1AD11.2.2.37 Investment properties
1AD11.2.2.38 Biological assets (where fair value is used)
1AD11.2.2.39 Biological assets – Livestock (where fair value model is adopted)
1AD11.2.2.40 Biological assets – Forestry (where cost model is adopted)
1AD11.2.2.41 Biological assets – Livestock (where cost model is adopted)
1AD11.2.2.1.42 Prior period adjustment – Change in accounting policy
1AD11.2.2.43 Change in accounting estimate
1AD11.3 Changes in presentation and accounting policies and corrections of prior period errors
1AD11.3.2 Extract from Section 1AD.8 to 1AD.10 of S1A of FRS 102
1AD11.3.2.2 Prior year adjustment disclosure
1AD11.3.2.2.1 Option 1: Analysis of prior year adjustments
1AD11.3.2.2.2 Option 2 – Analysis of prior year adjustments
AD11.3.2.2.3 Movement in profit and loss reserves note or statement of changes in equity
1AD11.3.2.4 Example extract of a change in accounting policy disclosure
1AD11.3.2.5 Change in classification from prior period
1AD11.4 True and fair view override
1AD11.4.1 Extracts from FRS 102: Section 1AD.11
1AD11.5 Notes to the statement of financial position – fixed assets
1AD11.5.1 Extract from FRS 102: Section 1AD.13 – 1AD.18
1AD11.5.2.1.3 Intangible assets
1AD11.5.2.1.5 Example disclosure for a revaluation reserve
1AD11.5.2.1.6 Investment properties
1AD11.5.2.1.7 Financial assets note
1AD11.6.1 Extracts from FRS 102: Section 1AD.20 – 1AD.21
1AD11.7 Borrowing/creditors details
1AD11.7.1 Extracts from FRS 102: Sction 1AD.26 – 1AD.28
1AD11.8 Appropriation of profit or loss/profit and loss reserve movements
1AD11.8.1 Extract from FRS 102: Section 1AD.35
1AD11.9 Fair value measurement
1AD11.9.1 Extract from FRS 102; Section 1AC.22 to 1AC.25
1AD11.9.2.1 Analysis – fair value disclosure requirements
1AD11.9.2.2 Extract from the notes to the financial statements
1AD11.9.2.2.1 Investment property
1AD11.9.2.2.3 Financial instrument note disclosures
1AD11.9.2.2.4 Fair value reserve disclosures
1AD11.10 Notes to the income statements/profit and loss account
1AD11.10.1 Extract from FRS 102: Sections 1AD.36 to 1AD .37
1AD11.10.2.2 Extract to show required profit and loss disclosures
1AD11.10.2.2.1 Exceptional item defined and the disclosure requirements
1AD11.10.2.2.1.1 Exceptional item disclosure
1AD11.10.2.2.2 Employee note disclosure
1AD11.10.2.2.3 other profit and loss disclosures
1AD11.11 Related party disclosures – director’s remuneration
1AD11.11.1 Extract from FRS 102: sections 1AD.38 to 1AD.40
1AD11.11.2.1 Related parties defined
1AD11.11.2.1.1 Connected person defined
1AD11.11.2.2 Directors remuneration disclosure
1AD11.11.2.2.1 Make up of director’s remuneration
1AD11.12.1 Extracts from FRS 102: 1AD.41 to 1AD.47
1AD11.12.2.1.1 Application to non-companies
1AD11.12.2.1.2 Get out from disclosure if below a specified value.
1AD11.12.2.2 Disclosures of loans and guarantees for the benefit of directors.
1AD11.13 Related party transactions material transactions with directors
1AD11.13.1 Extracts from FRS 102: Secton 1AD.48
1AD11.13.2.2 Is there exemptions from the disclosure?
1AD11.14 Other related party transactions (other than transactions with director)
1AD11.14.1 Extracts from FRS 102: Section 1AD.51
1AD11.15 Ultimate controlling party
1AD11.15.1 Extract from FRS 102: Section 1A.50
1AD11.16 Post balance sheet events
1AD11.16.1 Extracts from FRS 102: Sections 1A.54
1AD.11.17 Guarantees, financial commitments and contingencies
1AD.11.17.1 Extract from FRS 102: Sections 1AD.28 to 1AD.34
1AD11.17.2.2 Contingencies (1AD.31 and 1AD.34 of Appendix D of FRS 102)
1AD11.18 Holding of own shares
1AD11.18.1 Extract form FRS 102; Section 1AD.49
1AD11.19.1 Extract from FRS 102; Sections 1AD.52 – 1AD.53 and 1AD.55
1AD11.19.2.1 Disclosing legal form, registered office, basis of preparation
1AD11.20 Other items required by the formats under Companies Act
1AD11.20.4 Creditors: amounts falling due within one-year note
1AD11.20.5 Creditors: Amounts falling due after more than one-year note
1AD11.20.6 provision for liabilities
1AE.13.1 Additional disclosures encouraged for small entities
1AE.13.1.1 Extract from FRS102: Section 1AE.1
1AE.13.1.2.2 Statement of compliance
1AE.13.1.2.3.1 Transition note adjustments example
1A11.2.2.1 Transition to FRS 102 – first time exemption – Section 1A
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1A.13 Appendix E
1AE.13.1 Additional disclosures encouraged for small entities
1AE.13.1.1 Extract from FRS102: Section 1AE.1
1AD.1 When relevant to its transactions, other events and conditions, a small entity in the UK is encouraged to provide the following disclosures:
(a) a statement of compliance with this FRS as set out in paragraph 3.3, adapted to refer to Section 1A;
(b) a statement that it is a public benefit entity as set out in paragraph PBE3.3A;
(c) the disclosure relating to the material uncertainties related to events or conditions that cast significant doubt upon the small entity’s ability to continue as a going concern as set out in paragraph 3.9;
(d) dividends declared and paid or payable during the period (for example, as set out in paragraph 6.5(b));
(e) on first time adoption of this FRS an explanation of how the transition has affected it financial position and financial performance as set out in paragraph 35.13.
1AE.13.1.2 OmniPro comment
1AE.13.1.2.1 Overview
Although the Appendix E of section 1A of FRS 102 states section 1AE.1 of Appendix E of section 1A is encouraged, these would usually be required in order to allow them to show a true and fair view. See illustration of the above requirements. The dividend disclosure and gong concern disclosure is required under Companies Act so it must be provided. The encouraged disclosures are:
- a statement of compliance with FRS 102 (see 1.2.2)
- if it is a public benefit entity – state that fact (see section 34 of FRS 102 for further details)(see 13.1.2.2)
- if material uncertainties exist with regard to going concern – disclose this fact
- dividends declared and paid or payable (required for ROI entity in any event) (see 20.7)
- a transition note where adjustments exist on first transition to FRS 102 (see 1.2.3)
See below the disclosure with regard to compliance to FRS 102 and the going concern disclosure.
1AE.13.1.2.2 Statement of compliance
Example 2: Statement of compliance with FRS 102
NOTE: GOING CONCERN ASSUMPTION TO BE INCLUDED IN THE BASIS OF PREPARATION PARAGRAPH IN THE ACCOUNTING POLICY NOTES
The Financial Statements are prepared on the going concern basis , under the historical cost convention, [as modified by the revaluation of certain tangible fixed assets] and comply with the financial reporting standards of the Financial Reporting Council [and promulgated by Chartered Accountants Ireland ] including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) as adapted by Section 1A of FRS 102, the Companies Act 2014 (THIS IS APPLICABLE FOR ALL YEARS FOLLOWING TRANSITION) The company is a public benefit entity.
1AE.13.1.2.3 Transition note
See below for a sample disclosure note to cover off the transition to FRS 102 as detailed in section 1AE.1(e) Appendix E of FRS 102 where adjustments arose (This note is encouraged under Section 1A but it would make sense that this be included where there are adjustments so as to allow the financial statements to show a true and fair view).
1AE.13.1.2.3.1 Transition note adjustments example
Example 3: Transition note adjustment
FRS 102 PRINCIPLE ADJUSTMENTS
The reconciliation of the profit and loss prepared in accordance with Irish GAAP and in accordance with FRS 102 for the year ended 31 December 2014 and the reconciliation of the amount of total equity at 31 December 2014, before and after the application FRS 102, is as follows:
Para 10(2) if SI2008/409 – If there are special reasons for departing from any of the stated accounting policies the company shall note the reasons for departure and the effect on the balance sheet and profit and loss in that year.
|
Profit for the |
Total equity |
Total equity |
|
| year ended | as at | as at | |
| 31-Dec | 01-Jan | 31-Dec | |
| 2014 | 2014 | 2014 | |
| € | € | € | |
| As reported under Irish GAAP | 362,818 | 487,000 | 849,818 |
| Impact of: | |||
| – Holiday pay accrual (a) | (12,000) | (62,000) | (74,000) |
| – Rent free period for operating leases (c) | (32,000) | – | (32,000) |
| – Depreciation on spare parts transferred to PPE (e) | (8,000) | – | (8,000) |
| – Derecognition of sales on unusual credit terms (f) | – | (11,305) | (11,305) |
| – Finance income earned on sales on unusual credit terms (f) | 5,307 | – | 5,307 |
| – Derecognition of borrowing costs on transition (g) | – | (60,000) | (60,000) |
| – Reversal of depreciation on borrowing costs derecognised on transition (g) | 15,000 | – | 15,000 |
| Deferred tax impact of: | 0 | ||
| – Holiday pay accrual (i) | 1,500 | 7,750 | 9,250 |
| – Rent free period for operating leases (i) | 4,000 | – | 4,000 |
| – Revaluation of investment property (i) | (33,000) | (24,750) | (57,750) |
| – Revaluation of freehold premises (h) | 375 | (18,750) | (18,375) |
| – Spare parts transferred to PPE (i) | 1,000 | – | 1,000 |
| – Sales on unusual credit terms (i) | (663) | 1,413 | 750 |
| 304,337 | 319,358 | 623,695 | |
| – Correction of material error (b) | – | (75,000) | (75,000) |
| As reported under FRS 102 | 304,337 | 244,358 | 548,695 |
(a) Holiday pay accrual
Irish GAAP
Under Irish GAAP provisions for holiday pay accruals were not recognised and holiday pay was charged to the Profit and Loss account as it was paid.
FRS 102
FRS 102 requires short-term employee benefits to be charged to the profit and loss account as the employee service is received.
Impact
This has resulted in the company recognising a liability for holiday pay of €62,000 on transition to FRS
102. In the year to 31 December 2014 an additional charge of €12,000 was recognised in the profit and loss account and the liability at 31 December 2014 was €74,000.
(b) Prior year adjustment – material error
Irish GAAP
The company had incorrectly capitalised expenditure incurred on the development of the company brand name during the 2013 year.
FRS 102
The prior year adjustment is due to the company incorrectly capitalising expenditure incurred on the internal development of the company brand name. The financial statements have been restated to correct this error.
Impact
The prior year adjustment resulted in the derecognition of intangible assets of €75,000 at 31 December 2013 (and 2014 with a corresponding decrease in profit and loss reserves brought forward). There was no tax effect as a result of this adjustment.
(c) Rent free period for operating leases
Irish GAAP
Under Irish GAAP operating lease incentives, such as rent free periods were spread over the shorter of the lease period or the period to when the rental was set to a fair market rent.
FRS 102
FRS 102 requires that such incentives to be spread over the lease period. The company has taken advantage of the exemption for existing leases at the transition date to continue to recognise these lease incentives on the same basis as previous Irish GAAP. Accordingly the FRS 102 accounting policy has been applied to new operating leases entered into since 1 January 2014.
Impact
This has resulted in an increased operating lease charge of €32,000 for the year 31 December 2014 with a corresponding increase in the accrued lease liability at 31 December 2014.
Previous revaluation of tangible assets treated as deemed cost
Under previous Irish GAAP the company had a policy of revaluing freehold premises. On transition to FRS 102 the company has elected to use the previous revaluation of certain premises at 31 December 2013 as the deemed cost for that asset. As a result, the carrying amount previously included in the revaluation reserve has been transferred to other reserves. There is no effect on the balance sheet on transition other than on deferred tax and the aforementioned reclassification which has been discussed below.
Spare parts carried as stock
Irish GAAP
Under previous Irish GAAP the company had a significant value of spare parts carried as stock within Current Assets.
FRS 102
FRS 102 requires these spare parts to be carried as part of Tangible fixed assets.
Impact
This has resulted in an increase in Tangible fixed assets of €80,000 on transition to FRS 102 with a corresponding increase in related depreciation for 2014 of €8,000 retrospectively.
Sales on unusual credit terms
Irish GAAP
Under previous Irish GAAP the company sold goods worth €52,000 with unusual credit terms before the date of transition. The credit provided is for a period up to 31 December 2016. The normal cash price for these goods would be €36,000.
FRS 102
FRS 102 requires the company to recognise this sale as a financing transaction with an associated interest element on the transaction
Impact
This has resulted in a decrease in debtors of €11,305 on transition to FRS 102 with deemed income earned in 2014 of €5,307.
Capitalisation of borrowing costs
Irish GAAP
Under previous Irish GAAP the company adopted a policy of capitalising qualifying borrowing costs. On transition to FS 102, the company elects to expense all borrowing costs going forward.
FRS 102
FRS 102 requires the company to expense borrowing costs going forward.
Impact
This has resulted in a reduction of Tangible fixed assets of €60,000 on transition to FRS 102 and a resulting decrease in depreciation charged in 2014 of €15,000.
Investment Property carried at fair value
Irish GAAP
Under old GAAP investment property was carried at open market value with movements in value recognised in the STRGL/revaluation reserve unless there was a downward revaluation which was considered permeant, in which case it was recognised in the profit and loss. Deferred tax was not required to be recognised on the revaluation unless there was a binding agreement to sell.
FRS102
FRS 102 requires movement on investment property to be recognised in the profit and loss where it can be reliably measured without cost or effort. Section 29 requires deferred tax to be recognised on the uplift at the sales tax rate. On transition an adjustment was made to recognise deferred tax of €24,750 on the uplift. A further €33,000 was recognised in 2014 for the deferred tax uplift at 33%. An adjustment was also required to reclassify the movement in 2014 from the revaluation reserve to the profit and loss account. A reclassification was also required at the date of transition to reclassify the €75,000 uplift from the revaluation reserve to profit and loss reserves.
Deferred taxation
The company has accounted for deferred taxation on transition as follows:
Holiday pay accrual – Deferred tax of €7,750 has been recognised at 12.5% on the liability recognised on transition at 1 January 2014. In the year ended 31 December 2014 the company has recognised a credit of €1,500 in the profit and loss account to reflect the additional deferred tax asset as a result of the increase of the holiday pay accrual.
Rent free period for operating leases – In the year ended 31 December 2014 the company has recognised a credit of €4,000 in the profit and loss account in respect of the deferred tax on the increased operating lease charge.
Revaluation of freehold premises – Under previous Irish GAAP the company was not required to provide for taxation on revaluations. Under FRS 102 deferred taxation is provided on the temporary difference arising from the revaluation at the tax rate the asset is expected to be realised. A deferred tax charge of €18,750 arose on transition to FRS 102 and was set against other reserves. The €375 of this deferred tax in 2014 represents the deferred tax impact of deprecation charged on the uplift in that year.
Transfer of spare parts to Tangible fixed assets – Under previous GAAP the company carried spare parts as part of stock, on transition to FRS 102 these spare parts are now carried within Tangible fixed assets. A deferred tax asset of €1,000 has been recognised for the tax deduction not allowed in the comparative year at 12.5% (which will be allowed in the future).
(i) Sale with unusual credit terms – Under previous GAAP the company recognised finance income upfront on the sale of products with extended credit terms. On transition to FRS 102 this finance income must be removed and apportioned when earned by the company. A deferred tax asset of €1,413 was recognised for the reduction in income on transition to FRS 102 at 12.5% which will be released as the finance income credited to the profit and loss. €663 of this asset was released in the 2014 year to set off against the finance income released.
(ii)Revaluation of investment property – A deferred tax liability of €24,750 was recognised on transition for the uplift in value. The deferred tax rate used was the sales tax rate of 33%. A further €33,000 was recognised in the year 2014 to reflect deferred tax on the further uplift booked in 2014.
(d) Restatement of prior acquisitions
FRS 102 enables preparers of financial statements to avail of an exemption in respect of legacy business combinations and these can be accounted for based on previous GAAP at the transition date. The group has chosen not to avail of this exemption. The group has elected to restate all acquisitions since XX/XX/XX which includes the acquisitions of XX Limited.
UK and Irish GAAP
Under old GAAP, the creation of a separate intangible asset from goodwill was very difficult as it not onlyhad to be measured reliably but also needed to be separable and have a legal form. Therefore where it did not meet the definition for recognition it was consumed within goodwill. Deferred tax was not recognised on the difference between the fair value of net assets compared to its book value.
FRS 102
Under FRS 102 the intangible does not have to be separable and therefore more intangibles are likely to be recognised resulting in less goodwill but more intangibles requiring recognition. Deferred tax is required to be recognised on the difference between the fair value of the net assets compared to its book value (other than goodwill which is then set against goodwill).
Impact
A deferred tax liability of CUXXX was recognised on the difference between the fair value of net assets acquired and the book values at the date of transition and set against goodwill. A movement of CUXXX was posted during the year ended 31 December 2014.
At the 1 January 2014, additional intangibles relating to brand names and customer relationships with a net book value of CUXXX have been recognised, reducing the net book value of goodwill recognised of CUXXX.
Additional amortisation of CUXXX was recognised during the year ended 31 December 2014. The impact was to reduce the profit for the year and the net assets by CUXXX.
OR
FRS 102 enables preparers of financial statements to avail of an exemption in respect of legacy business combinations and these can be accounted for based on previous GAAP at the transition date. The group has chosen to avail of this exemption. However no exemption is provided for the recognition of deferred tax on such business combinations.
UK and Irish GAAP
Under old GAAP, deferred tax was not recognised on the difference between fair value of net assets compared to its book value.
FRS 102
Under FRS 102 deferred tax is required to be recognised on the difference between fair value of net assets compared to its book value (other than goodwill).
Impact
As a result of this difference, a deferred tax liability of CUXX was recognised on the 1 January 2014 with the corresponding amount posted to retained earnings. Profit for the year ended 31 December 2014 was reduced by CUXXX as a result of the movement on the deferred tax on this acquisition during that year.
(a) Loans and advances to group/related companies/directors
UK and Irish GAAP
Under UK and Irish GAAP, financial instruments at non-market rates or transactions which included a financing arrangement could be stated at the amount actually given.
FRS 102
Under FRS 102, debtors including loans receivable are classified as basic financial instruments and must be carried at amortised cost. Long term loans advanced to third parties have been assessed under the requirements of Section 11 of FRS 102 and a number of these loans were given at non-market rates and therefore are required to be measured at the present value of the future payments discounted at the market rate of interest for a similar debt instrument at the inception of the arrangement.
Impact
As a result of this difference, this has resulted in a difference between the amount previously recognised for these loans and the present value of the loan at a market rate of interest. The impact is as follows:
- The carrying amount of long term debtors decreased by CUXXX at 1 January 2014 with a corresponding debit to profit and loss reserves /equity /other reserves /investments (adjust as applicable). There is no deferred tax impact of these adjustments as these are not taxable.
- The carrying amount decreased by CUXXX at 31 December 2014 with a corresponding credit to interest income in the profit and loss account to reflect the unwinding of the interest income/discount.
- showing the movement in the loan from 1 January to 31 December 2014. There is no deferred tax impact of these adjustments as these are not taxable
(b) Loans and advances from group/related companies/directors
UK and Irish GAAP
Under UK and Irish GAAP, financial instruments at non-market rates or transactions which included a financing arrangement could be stated at the amount actually received net of repayments etc.
FRS 102
Under FRS 102, creditors including loans payable are classified as basic financial instruments and must be carried at amortised cost. Long term loans received from various parties have been assessed under the requirements of Section 11 of FRS 102 and a number of these loans were received at non-market rates and therefore are required to be measured at the present value of the future payments discounted at the market rate of interest for a similar debt instrument at the inception of the arrangement.
Impact
As a result of this difference, this has resulted in a difference between the amount previously recognised for these loans and the present value of the loan at a market rate of interest. The impact is as follows:
- The carrying amount of long term loans/credits decreased by CUXXX at 1 January 2014 with a corresponding credit to profit and loss reserves/capital contribution/other reserves (adjust as applicable). There is no deferred tax impact of these adjustments as these are not
- The carrying amount decreased by CUXXX at 31 December 2014 with a corresponding debit to interest expense in the profit and loss account to reflect the unwinding of the interest expense/discount showing the movement in the loan from 1 January to 31 December There is no deferred tax impact of these adjustments as these are not tax deductible.
Derivative financial instruments (Forward foreign currency contracts and interest rate swaps)
UK and Irish GAAP
Under UK and Irish GAAP there was no requirement to recognise derivative financial statements at fair value, instead they were disclosed. For interest rate swaps, the net interest was accrued.
Alternatively, an entity could choose to retranslate the year end foreign currency balances at the average forward rate that covers the net exposure.
FRS 102
FRS 102 requires these derivatives to be recognised at fair value on the balance sheet with movement year on year recognised in the profit and loss where hedge accounting is not adopted. Year-end foreign currency balances cannot be retranslated at a forward rate, instead the year end spot rate must be used.
Impact
The fair value of forward foreign exchange contracts equated to a loss of CUXXX at 1 January 2014 and to a profit of CUXXX at 31 December 2014. As a result at the date of transition, creditors were increased by CUXX at 1 January 2014 and the profit and loss reserve was debited with the same amount. Deferred tax of CUXX was recognised on this adjustment with the corresponding entry posted to profit and loss reserves.
The movement between the loss at the 1 January to 31 December 2014 was posted to the profit and loss thereby increasing profits by CUXXX. Deferred tax of CUXXX was recognised in the profit and loss account on this movement.
AND WHERE APPLICABLE IF CONTRACTED RATES USED TO RETRANSLATE FOREIGN CURRENCY BALANCES AT THE YEAR END DATE
An adjustment at the date of transition of CUXXX and CUXXX was made to reduce debtors and creditors respectively so as to show the foreign currencies at the year-end spot rate as opposed to the contracted rate. The net impact was posted to profit and loss reserves brought forward. Deferred tax of CUXX was also recognised on this balance.
For the year ended 31 December 2014, CUXXX and CUXXX was made to reduce debtors and creditors respectively so as to show the foreign currencies at the year-end spot rate. The net impact was posted to foreign exchange costs in the profit and loss. Deferred tax of CUXXX was recognised in the profit and loss for the tax effect on the movement between the prior year adjustment and the current year end adjustment.
OR WHERE HEDGE ACCOUNTING IS ADOPTED
Use of contracted rate
Under old Irish GAAP the company was permitted to recognise foreign currency sales at the forward contract rate where forward foreign exchange contracts had been taken out by the company. FRS 102 however does not permit the use of the forward contract rate instead the foreign currency sale must be recognised and retranslated at the transaction rate at the time of sale. As a result on transition to FRS 102 a transition adjustment was recognised in the comparative year (year ended XX/XX/XX) to increase turnover by CUXXX to CUXXXX and increase administrative expenses by CUXXXX to reflect turnover at the transaction rate.
Under old Irish GAAP the company retranslated year end monetary assets and liabilities at the average forward foreign currency contract rates that covered the net foreign currency exposure where such forward contracts existed. FRS 102 does not permit the year end monetary assets to be retranslated at the average forward contract rates instead they must be measured at the year end spot rate and the forward foreign currency contracts are required to be fair valued on the balance sheet. As a result a transition adjustment was recognised:
- at XX/XX/XX to decrease the creditors balance by CUXXX, decrease the trade debtors balance by CUXXXX and decrease the prepayment balance by CUXXX with a corresponding adjustment to increase administrative expenses by CUXXXXX to restate these monetary foreign currency balances to the spot rate. This also resulted in a deferred tax asset being recognised of CUXXXXX on the adjustment with the corresponding credit (decrease in tax) being recognised in the tax line in the profit and loss account.
Derivatives
Under old Irish GAAP there was no requirement to fair value open forward foreign exchange contracts on the balance sheet instead these were only required to be disclosed (recognised on an accruals basis). FRS 102 requires these derivatives to be fair valued on the balance sheet and recognised in the profit and loss account unless hedge accounting is applied by the company in which case the effective portion is recognised in other comprehensive income until the probable/contracted transaction occurs at which time the amount previously recognised in OCI is transferred to the profit and loss account. The ineffective portion of the hedge is recognised in the profit and loss account immediately. On transition to FRS 102 the company adopted hedge accounting and an adjustment was made to:
- Recognise these derivatives at fair value at the 29 December 2014 that being an asset of CUXXXX and a liability of CUXXXX which a corresponding net credit/increase of CUXXXX in the cash flow hedge reserve on the balance sheet. A net deferred tax liability of CUXXXX was also recognised on the balance sheet with the corresponding debit/decrease in the cash flow hedge reserve on the balance sheet.
- Recognise these derivatives at fair value at the XX/XX/XX that being an asset of CUXXXX with a corresponding credit/profit of CUXXXXX recognised in other comprehensive income/Statement of Comprehensive Income for the effective portion and subsequently in the cash flow hedge reserve and a credit/profit of CUXXXXX recognised in administrative expenses for the ineffective portion. A deferred tax liability of CUXXXXX was also recognised on the balance sheet with a debit of CUXXXX recognised in other comprehensive income/Statement of Comprehensive Income and subsequently in the cash flow hedge reserve and the remaining CUXXXX recognised in the tax line in the profit and loss account. The deferred tax CUXXXX recognised at XX/XX/XX was also derecognised to other comprehensive income/Statement of Comprehensive Income and the cash flow hedge reserve in the year
The company uses financial instruments to hedge the company’s exposure to currency fluctuations. As these meet the requirements for hedge accounting and can be treated as a cash flow hedge under FRS 102, the movement in the fair value of the hedge is accounted for through reserves. As a result, at 1 January 2014 the fair value of such derivatives at that date was CUXXX. This asset was recognised on the balance sheet and the adjustment posted to the cash flow hedge reserve.
At 31 December 2014, the fair value of CUXXX was recognised in the balance sheet with the movement on the prior year posted to other comprehensive income and then to the cash flow hedge reserve.
Traded investments
UK and Irish GAAP
Under UK and Irish GAAP entities could carry traded investments/Collective Investments in shares at cost.
FRS 102
Under Section 11 of FRS 102, such investments must be carried at their fair value with the movement in fair value recognised in the profit and loss. Section 29 also requires deferred tax to be recognised on the difference between the tax value and the carrying amounts.
Impact
On transition to FRS 102 on 1 January 2014, the carrying value of financial assets which were actively traded on a stock exchange was increased by CUXXX with the corresponding amount being posted to profit and loss reserve. Deferred tax of CUXXX was recognised on this adjustment with the corresponding amount posted to profit and loss reserves brought forward.
At 31 December 2014, the carrying value of financial assets which were actively traded on a stock exchange was increased by CUXXX with the corresponding amount being posted to the profit and loss. The deferred tax liability was increased by CUXXX at 31 December 2014 to reflect the difference between the tax value and the carrying amount at that date.
Collective investments – Other items required to be held at fair value
UK and Irish GAAP
Under UK and Irish GAAP entities carried collective investments at cost less impairment.
FRS 102
Under Section 12 of FRS 102, such investments must be carried at their fair value with the movement in fair value recognised in the profit and loss. Section 29 also requires deferred tax to be recognised on the difference between the tax value and the carrying amounts.
Impact
On transition to FRS 102 on 1 January 2014, the carrying value of these investments was increased by CUXXX with the corresponding amount being posted to profit and loss reserve. Deferred tax of CUXXX was recognised on this adjustment with the corresponding amount posted to profit and loss reserves brought forward.
At 31 December 2014, the carrying value of these investments was increased by CUXXX with the corresponding amount being posted to the profit and loss. The deferred tax liability was increased by CUXXX at 31 December 2014 to reflect the difference between the tax value and the carrying amount at that date.
Computer software
UK and Irish GAAP
Under UK and GAAP, website development costs and software were classified as property, plant and equipment.
FRS 102
Website development costs and software where the software is not an integral part of the hardware is required to be classified as intangibles under FRS 102.
Impact
Computer software, with a book value of CUXXX at 1 January 2014 has been reclassified from property, plant and equipment to intangible assets. The amount reclassified at 31 December 2014 was CUXXX. There is no impact on the profit or equity .Prior year adjustment – material error
The prior year adjustment is due to the omission of inventory located in an outside warehouse being excluded from the inventory at 31 December 2014 and 31 December 2013. The value of the inventory at 31 December 2014 was CU100,000 and the value of the inventory at 31 December 2013 was CU95,000. The financial statements for 2014 has been restated to correct this error.
The prior year adjustment resulted in an increase to the inventory balance at 31 December 2013 and 2014 of CU95,000 and CU100,000 respectively. This has resulted in the cost of sales for 31 December 2014 year end increasing by CU5,000 and the profit and loss reserves increasing by CU85,500 being the net of tax adjustment. The current tax liability in the comparative year has increased by CUXXX as a result of this adjustment.
1A11.2.2.1 Transition to FRS 102 – first time exemption – Section 1A
Details of possible items to be disclosed as a result of the transition is discussed in Section 35 of this manual. Section 35.10(u-v) exemptions allow a small entity where transitions for periods before beginning before January 2017 to: certain exceptions as follows;
– Not restate the comparative figures disclosed in the first set of financial statements prepared under FRS 102 for the following (instead the opening reserves for the current year is adjusted):
(For example, assume Company A has a year end of 31 December. The date of transition would then be 1 January 2014 and the comparatives would be for the year ended 31 December 2014. In this case the 2014 comparatives would not need to be adjusted instead the adjustments would be posted to reserves st the beginning of the 2015 year)
– Financial instruments required to be held at fair value under Section 11 and Section 12 of FRS 102. Examples of what would need to be fair valued under these sections are:
– Fair valuing forward foreign exchange contracts
– Fair valuing interest rate swaps
– Investments where the entity does not hold a significant influence (usually less than 20% owned) which can be measured reliably (i.e. publically traded shares
– Sales and purchases to/from related parties (as defined in Section 33) where payment is beyond normal business terms
– Loan to/from related parties which are at non-market rates and are not repayable on demand.
The small entity will measure the above assets/liabilities in line with the accounting policy adopted under old GAAP at the date of transition and in the comparative year.
Where this exemption is claimed the small entity will post the carrying amount through the current year by posting it to opening retained earnings. When measuring the assets/liabilities at that date, a small company can determine the market rates on the related party loan based on the market date at that date. There is no requirement to try to determine these rates at the time the loan was initially entered into.
See below an example of the disclosure to be included within the accounting policy notes detailing the disclosure exemption claimed (only applicable if they transitioned for periods beginning before 1 January 2017):
Other financial assets (note)
Other financial assets include investments which are not investments in subsidiaries, associates or joint ventures. Investments are initially measured at fair value which usually equates to the transaction price and subsequently at fair value where investments are listed on an active market or where non listed investments can be reliably measured. Movements in fair value are measured in the profit and loss.
When fair value cannot be measured reliably or can no longer be measured reliably, investments are measured at cost less impairment.
The entity has taken advantage of the exemption contained in Section 35.10(u) not to comply with the fair value measurement requirements of Section 11-Basic Finance Instruments and Section 12- Other Financial Instruments Issues on the date of transition to FRS 102 of 1 January 2014 or in the comparative financial period presented. Instead the entity has continued to apply the accounting policy requirements for these financial instruments under old UK GAAP. A transition adjustment has been posted to equity on 1 January 2015 so as to comply with the requirements of Section 11 and Section 12 for the current financial year as required by Section 35.10(u). As a result of availing of this exemption, listed investment have been carried at cost less impairment in the comparative financial period presented and any forward exchange contracts are disclosed as required under old UK & Irish GAAP accounting rules.
(i) Trade and other debtors (note – note where applicable this should be included in creditors note also)
Trade and other debtors including amounts owed to group companies are recognised initially at transaction price (including transaction costs) unless a financing arrangement exists in which case they are measured at the present value of future receipts discounted at a market rate. Subsequently these are measured at amortised cost less any provision for impairment. A provision for impairment of trade debtors is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. All movements in the level of provision required are recognised in the profit and loss.
The entity has elected to adopt the exemption contained in Section 35.10(v) and to apply the rules detailed in Section 11 to debt instruments with related parties where a financing arrangement existed on the 1 January 2015 as opposed to the date of transition on 1 January 2014. As a result, a transition adjustment was posted to recognise the loans due to/from related parties at the present value of the minimum future payments and amortised cost utilising the prevailing market rate on the 1 January 2015 as permitted by Section 35.10(v)(c). For the comparative year presented these balances are carried at the amount recognised under old UK & Irish GAAP that being the amounts received/advanced less repayments.
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Examples
Example 2: Statement of compliance with FRS 102
Example 3: Transition note adjustment
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