chapter 7 Flashcards
What is FRS 102, and when was it introduced?
FRS 102 is the UK GAAP accounting standard introduced in 2015, replacing 3,000 pages of old UK GAAP with a simplified 350-page version.
What is FRS 102 based on?
It is based on IFRS for SMEs but allows some old UK GAAP treatments not permitted under IFRS.
What is the role of the Financial Reporting Council (FRC)?
It is the UK’s independent regulator for corporate reporting and governance, ensuring compliance with financial reporting standards.
What is ARGA, and why is it replacing the FRC?
The Audit, Reporting and Governance Authority (ARGA) is the planned replacement for the FRC following corporate failures like Carillion. However, its introduction has been delayed.
What is the role of the Conduct Committee?
It reviews company reports for compliance with the Companies Act 2006 and investigates financial reporting errors.
What are the criteria for a small entity under FRS 102?
A company must meet two out of three:
Turnover < £10.2m
Assets < £5.1m
Employees < 50
What are the criteria for a micro entity under FRS 105?
A company must meet two out of three:
Turnover < £632k
Assets < £316k
Employees < 10
How do reporting requirements differ between small and micro entities?
Small entities must ensure accounts are “true and fair.”
Micro entities (FRS 105) have very limited disclosures, and their accounts are presumed legally true and fair.
Why don’t all companies use IFRS instead of UK GAAP?
IFRS has stricter disclosures and could negatively impact:
Tax liabilities
Distributable profits
Regulatory solvency
Debt covenants
In what situations might a company need to use multiple accounting standards?
A company may need to prepare:
UK GAAP accounts for UK regulatory filings.
IFRS accounts if part of an international group.
US GAAP accounts if the parent company follows US rules.
