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Contents
3.2 Small company’s exemptions for certain sections in Section 3.
3.2.1 Extract from FRS 102: Section 3.1A.
3.3.1 Extract from FRS 102: Section 3.2.
3.4.1 Extract from FRS 102: Section 3.3-3.3A.
3.4.2.2 Example of FRS 102 Compliance Statement and Public Benefit entity Statement
3.5 Compliance with this FRS – True and fair override.
3.5.1 Extract from FRS 102: Section 3.4-3.6.
3.5.2.1 True and Fair override defined.
3.5.2.2 Expected instances where the true and fair override would be revoked.
3.5.2.3 The Disclosures required where a true and fair override is invoked.
3.5.2.3.1 The disclosure required in the following periods financial statements.
3.6.1 Extract from FRS 102: Section 3.8-3.9.
3.6.2.1 Overview and minimum look forward for going concern.
2.6.2.2 Material uncertainties relating to going concern.
3.6.2.3 Disclosure where financial statements prepared on a basis other than the going concern.
3.7.1 Extract from FRS 102: Section 3.10.
3.8 Consistency of presentation.
3.8.1 Extract from FRS 102: Section 3.11-3.13.
3.8.2.2 Disclosure period where there is a change.
3.9.1 Extract from FRS 102: Section 3.14.
3.10 Materiality and aggregation.
3.10.1 Extract from FRS 102: Section 3.15-3.16A.
3.10.2.1 Definition of Material.
3.11 Complete set of financial statements.
3.11.1 Extract from FRS 102: Section 3.17-3.22.
3.12 Identification of the financial statements.
3.12.1 Extract from FRS 102: Section 3.23-3.24.
3.12.2.1. Requirements throughout the Financial Statements.
3.12.2.2 Legal form and business activities requirement.
3.13 Presentation of information not required by this FRS.
3.13.1 Extract from FRS 102: Section 3.25.
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3.6 Going Concern
3.6.1 Extract from FRS 102: Section 3.8-3.9
3.8 When preparing financial statements, the management of an entity using this FRS shall make an assessment of the entity’s ability to continue as a going concern. An entity is a going concern unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the date when the financial statements are authorised for issue.
3.9 When management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern
3.6.2 OmniPro comment
3.6.2.1 Overview and minimum look forward for going concern
As per Section 3.8 of FRS 102 when adopting the going concern concept it is presumed that the company will continue in business for at least 12 months from the date of the approval of the financial statements.
Note this is the minimum period, so for example if the directors knew at the time of signing the financial statements that the company would cease 15 months from that date then the accounts should not be prepared on the going concern basis. Further discussion on accounting for subsequent events has been discussed in Section 32 of FRS 102. Refer to Section 32 at 32.5.2. for further details. The entity should disclose that the financial statements are prepared on a going concern basis.
See example below of a statement included in the basis of preparation paragraph with regard to going concern.
Example 3: Going concern disclosure
The Financial Statements are prepared on the going concern basis, under the historical cost convention, [as modified by the revaluation of investment property, the revaluation of land and buildings and intangibles] and the measurement of certain assets and liabilities measured at fair value and comply with the financial reporting standards of the Financial Reporting Council [and promulgated by Chartered Accountants XXXX] and the Companies Act 2014 (for Irish entities)[Companies Act 2006 (for UK Entities)].
2.6.2.2 Material uncertainties relating to going concern
Section 3.9 of FRS 102 require where management make an assessment that going concern exists that cast doubt on the going concern basis, then these uncertainties must be disclosed. See possible wording where material uncertainties exist:
Example 4: Basis of preparation – material uncertainty over going concern
Basis of preparation
The financial statements have been prepared on a going concern basis. The validity of this assumption is dependent on the anticipated maintenance of support of its bankers through the maintenance of existing borrowings together with ongoing interest roll-up and a return to trading profitability.
If the company was unable to continue in operational existence, adjustments would have to be made to adjust the balance sheet values of assets to their recoverable amounts, to provide for further liabilities that might arise, and to reclassify fixed assets and long-term liabilities as current assets and liabilities.
The directors have considered the financial position and trading performance of the company, together with the anticipated support from the company’s bankers. They are satisfied that the company will return to trading profitability in the year to XXXXX. As a result, while recognising that there is uncertainty about these matters at present, the directors are satisfied that the company has the necessary resources to continue trading for the foreseeable future and accordingly they believe that it is appropriate for the financial statements to be prepared on the going concern basis.
3.6.2.3 Disclosure where financial statements prepared on a basis other than the going concern
Section 3.9 of FRS 102 requires disclosure of the fact that the financial statements have been prepared on a basis other than a going concern, giving the basis of which, they are prepared and the reason why they are not prepared on the going concern basis.
The below illustrates some of the requirements where an entity does not prepare financial statements on the going concern basis.
Example 5: Other than going concern disclosure
Basis of preparation
As explained in the directors’ report on page X, the company intends to cease operations by XXXX and to transfer all its operations to XXXXX.
The financial statements have not been prepared on a going concern basis. Where appropriate, the carrying values of assets have been restated to their recoverable amounts, and liabilities have been restated to their estimated settlement amounts and classified as current. Provision has been made for all closure costs arising from the decision to cease trading.
Preparation of financial statements on a break up basis involves the company making estimates and assumptions that affect the reported amounts of assets and liabilities. Estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are continually re-evaluated.
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Examples
Example 1: Statement of compliance with FRS 102.
Example 2: Statement of compliance with FRS 102 on adoption of FRS 102.
Example 3: Going concern disclosure.
Example 4: Basis of preparation – material uncertainty over going concern.
Example 5: Other than going concern disclosure.
Example 6: Frequency of reporting disclosure.
Example 8: Basis of Preparation Policy.
Example 9: Basis of Preparation Policy.
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