The Financial Reporting Council (FRC) recently issued changes to the UK financial reporting framework which represent a new challenge for all entities currently reporting under UK or Irish GAAP.
Conversion to reporting under either EU-adopted International Financial Reporting Standards (IFRS) or the new Financial Reporting Standard in the UK and Republic of Ireland (FRS 102) has implications beyond an entity’s financial reporting function; in particular impacts for cash tax payments. Gaining an understanding of the business and financial impacts of change now will allow management to anticipate and resolve key strategic and operational issues in advance of the mandatory adoption date in 2015, or allow for early adoption.
The shift away from current UK and Irish GAAP will require all entities (except those small enough to use the FRSSE) to report in accordance with FRS102 or IFRS. ‘Qualifying entities’ will be able to take advantage of reduced disclosure requirements under either IFRS or FRS102. The first mandatory non-UK and Irish GAAP financial statements are required for 31 December 2015 year ends, with a 1 January 2014 transition balance sheet. This might seem a long way off, but the time quickly passes when all intervening steps are considered, and conversion to a new framework must take place alongside normal activities. In addition, if companies plan early, they could choose to move from current UK and Irish GAAP earlier, should there be a benefit to do so.
These pages provide an overview of the recent UK and Irish financial reporting framework developments and identify some key actions needed now to prepare for the change.
There are a number of issues to consider in determining what framework to adopt and when to convert, including consideration of impacts for distributable reserves, tax payments and the related tax charge, IT systems, processes and controls. Conversion projects require careful management to ensure that decisions on accounting frameworks align with the entity’s strategic direction.