“LOOK BEFORE YOU LEAP” is the message from advisors to the introduction of new accounting rules that will eventually replace UK standards.
The first two parts of a new framework to replace local accounting rules, UK GAAP, have been released by the Financial Reporting Council’s standard-setting arm.
FRS 100 and FRS 101, which become mandatory from 1 January 2015, set out the framework for reporting standards and allows reduced disclosures for subsidiaries looking to use international accounting standards (IFRS). New UK GAAP (FRS 102) is expected in the new year.
Advisors have urged clients to take their time – but think early about planning – to decide how the new rules could apply to them.
“There may be cost savings for companies that choose to adopt IFRS or new UK GAAP and there may be advantages for those electing to adopt the reduced disclosure framework,” said PwC partner Iain Selfridge.
“Companies will have to assess their group structure and consider the appropriate reporting options for each subsidiary, balancing the needs of financial statements users against the potential cost savings from preparing reduced disclosures.
“Cash tax position, distributable reserves and XBRL (online accounts) tagging requirements may all be affected. Companies that fail to adequately prepare could find moving to a new accounting framework is more costly and time-consuming than they anticipated. The effort involved shouldn’t be underestimated.”
The move to update the standards effectively brings UK rules into line with international standards – but proportionate to the size and complexity of the company.
Roger Marshall (pictured), FRC board member and chair of the Accounting Council, said: “Respondents asked us for a reduced disclosure framework, principally so that subsidiaries within groups reporting in accordance with EU-adopted IFRS could use the same reporting principles as the group, but with reduced disclosures, given the often limited use for those financial statements. This will result in cost savings for those groups.”
The regulations, which come into force today, force large companies to tender their statutory audit at least every ten years, and change their auditor every 20 years
The Rules: Accounting for long term arrangements under FRS 102 – what you need to be thinking about today?
If a change in accounting standard is approaching, planning and anticipation is key when considering new or existing long term arrangements
With the introduction of EU audit reform, Calum Fuller looks at the pressure points facing finance functions and their audit procedures
RSM survey finds 40% of companies not ready to meet their tax, legal and financial reporting obligations