Posted by admin - August 20, 2015 9:04 am
FRS 102 – A Business Opportunity
What is FRS102?
FRS 102 became mandatory for accounting periods commencing on or after 1 January 2015, unless you qualify as a small company in which case you can adopt the new FRSSE 2015.
Small companies will therefore have the option of preparing their financial statements for periods commencing on or after 1 January 2015 but before 1 January 2016 in accordance with the FRSSE 2015 or FRS 102. However the FRSSE 2015 will only be available for one year as it will become non-compliant with EU legislation from 1 January 2016 and so will be abolished. Accordingly for periods commencing on or after 1 January 2016 it will be mandatory for these companies to adopt FRS 102 in their financial statements.
Date of transition
An entity’s date of transition to FRS 102 is the beginning of the earliest period for which the entity presents full comparative information in accordance with this FRS in its first financial statements that comply with this FRS. For a company with a year end of 31 October the mandatory date of transition to FRS 102 is 1 November 2015, but with early adoption would be 1 November 2014.
Exemptions
There are a number of exemptions available to an entity when preparing its first financial statements that conform to FRS 102. One such exemption presents an opportunity for companies to strengthen their balance sheets.
a) Fair value as deemed cost
A first-time adopter may elect to measure an:
(i) item of property, plant and equipment;
(ii) investment property; or
(iii) intangible asset which meets the recognition criteria and the criteria for revaluation in Section 18 of FRS 102 Intangible Assets other than Goodwill
on the date of transition to FRS 102 at its fair value and use that fair value as its deemed cost at that date.
b) Revaluation as deemed cost
A first-time adopter may elect to use a previous GAAP revaluation of an:
(i) item of property, plant and equipment;
(ii) investment property; or
(iii) intangible asset which meets the recognition criteria and the criteria for revaluation in Section 18 of FRS 102
at, or before, the date of transition to FRS 102 as its deemed cost at the revaluation date.
Where fixed assets are currently shown below market value, for example properties which are shown at cost, these have the potential to be revalued in order to reflect the true value of the company.
This may be a particularly attractive option for shareholders of companies which may be marketed for sale in the future or in obtaining more favourable credit terms or lending from suppliers and financial institutions.
This exemption could equally be used by a company currently following a policy of revaluation which wishes to remove itself from the burden of obtaining external valuations at least every 5 years. By using a previous revaluation of property as deemed cost no further valuations would be required.
Contact us for help
To find out more about the opportunities that FRS 102 could bring to your company speak to your McCabe Ford Williams representative.
