FRS102 replaces Irish and UK GAAP for accounting periods commencing on or after 1st January 2015 for relevant Irish Companies.
The 1st January 2015 commencement date means that the comparative for 2014 will be required to be restated to comply with FR102. This means that the opening balance sheet for 2014 will have to be restated. Therefore when preparing accounts for the year ended 31/12/2015 under FRS102, the balance sheet at the 1/1/2014 and 31/12/2014 will have to be restated using FRS102.
FRS102 is one standard covering all accounting areas.
Please see below the comparison and main differences of FRS102 to current Irish GAAP
Current Irish GAAP
Profit & Loss Account
Statement of Financial Position
Statement of total recognised gains & losses (STRGL)
Statement of Comprehensive Income. This may be included in the Income Statement to show a single Statement of Comprehensive Income
Statement of changes in equity
Cash flow statement
Statement of Cash Flows – cash flows classified as operating, investing or financing
Recognition of grant income in P&L and matches to the related expense
Recognise in Income when performance related conditions are met (performance model) or recognise in income when related expense incurred (accrual model)
Capitalised and amortised over useful life. Useful life can’t exceed 20 years
Amortised and assumed to have a definite life, with a default period of 10 years if the useful life can’t be reliably determined
Open market value with adjustments recognised in the STRGL
Recognised at Fair Value at reporting date in Balance Sheet and recognise changes through the P&L account. Where there is no reliable Fair Value or it involves excessive cost or effort they are accounted for at cost less accumulated depreciation and impairment losses
Internal intangible assets can be recognised provided it has a readily ascertainable market value. Intangible assets may be deemed to have an infinite life and thereby not be amortised, if so it will undergo an annual impairment review. Intangible assets may be revalued
Internal intangibles must be identifiable (capable of being separated and transferred or derived from contractual terms) & meet the “Probability of future economic benefits” test. Internally generated brands, logos, customer lists & similar assets cannot be capitalised. Start-up costs cannot be capitalised. Intangibles cannot have an infinite life, if life span cannot be determined it is presumed to be 10 years. Recognised Intangibles shall be measured at cost less depreciation or option to use Fair Value if there is an active market by Fair Value.
Provide for CT at 12.5% and only provide for section 440 surcharge when paid
Provide for CT at the rate reflecting the section 440 surcharge unless the dividend is reflected in the Financial Statements
Uses timing differences based on amounts recognised in the P&L to amounts recognised in the Tax return. Discounting to reflect “time value” is permitted. Unrelieved losses and other deferred tax assets only recognised if it is probable will be recovered against reversal of Deferred Tax Liabilities or future taxable profits.
Discounting of deferred assets / liabilities not permitted. Provide for deferred tax on timing difference. Provide for on revaluation of Fixed Assets (including investment property) and quoted shares. The tax rate to use will depend on how the asset will be realised, through use or by sale.
Property / Plant & Equip usually - CT rate of 12.5%.
Non depreciated assets (Land) - CGT rate of 33%. Investment Property – CGT rate of 33%.
Quoted Shares – CGT rate of 33%
Foreign Currency Transactions
Permits choice of the spot rate or the forward contract rate for FX transactions. Closing FX assets & Liabilities can be valued at the closing rate or the forward contract rate.
All transactions must be measured at the spot (or average) FX rate ruling at the date of the transaction. FX monetary assets & liabilities must be translated at the closing rate and a gain or loss taken to the Income Statement. FX gains & losses are recognised in the Income Statement.
Accounting Policies, estimates and errors
Only Fundamental errors detected in subsequent years are restated as prior year adjustment in prior years accounts
Material errors detected in subsequent years are restated as prior year adjustment in prior years accounts
Not generally accounted for.
Holiday pay to be recognised as an accrual or prepayment as appropriate
Changes to financial statements for accounting periods commencing on 1st January 2015 will need to be implemented so this means that for relevant companies:
OSK Audit are fully up to speed with FRS102 and are on hand to ensure an efficient and cost effective conversion to FRS102.
Deirdre McDermott is Director in OSK Audit. Contact OSK Accountants Dublin for all your accounting and tax queries.
A video message from Tadgh O'Sullivan, Director.
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