UK GAAP

Question 1

Where is the guidance about accounting standards that UK companies should apply found?

Answer 1

FRS 100 Application of Financial Reporting Requirements

Question 2

What are the rules that listed UK comps should follow under FRS 100?

Answer 2

Listed groups must prepare accounts under IFRS.

However companies within group can take advantage of disclosure exemptions outlined in FRS 101 when preparing individual FS

Question 3

What should non-listed UK companies follow?

Answer 3

FRS 102 - Financial Reporting Standard applicable in the UK and the Rep of Ireland

UNLESS

The voluntarily chose to apply IFRS

They are a micro entity and chose to apply FRS 105 The FRS applicable to Micro entities regime

Question 4

Difference between Conceptual Framework under IFRS and FRS 102?

Answer 4

CF - The framework does not identify these as separate qualitative characteristics

FRS102 - identifies qualitative characteristics of materiality, substance over form and prudence

Question 5

Difference IAS1 - presentation of FS between IFRS and FRS102

Answer 5

IFRS - recommended formats

FRS 102 - prepared in accordance with companies Act 2006 therefore prescribed format (Assets- Liabilities = Equity)

Question 6

Difference between IAS20 gov grants between ifrs and frs102?

Answer 6

IFRS - choice of using deferred income or netting off method

FRS102 - deferred income method only

Repayment
IFRS - Detailed Guidance
FRS102 - Recognise as Liability when meets the definition

Question 7

Difference IAS 23 Borrowing Costs IFRS and FRS102?

Answer 7

IFRS - eligible borrowing costs must be capitalised

FRS102 - there is a choice to capitalise or expense borrowing costs

Question 8

Diff IAS 12 Income Taxes Deferred Tax between IFRS and FRS102

Answer 8

IFRS - Records Deferred tax in SFP

FrS102 - records deferred tax in SPL

Question 9

Diff IAS34 related party transactions?

Answer 9

Key Management Personnel

IFRS - disclosure of key management personnel compensation must be disaggregated e.g. ST benefits, post employment benefits, share based payments

FrS102 - Compensation is disclosed in total only

Question 10

What is FRS102 EXEMPTION from IAS 24 related parties?

Answer 10

transactions between 2 or more members of a group need not be disclosed as long as any sub is wholly owned

Question 11

Diff IAS 28 investments in associates and joint ventures

GW and Trans Costs

Answer 11

Goodwill

IFRS - GW arising on an associate is included within its carrying amount and is not amortised

FrS102 -Implicit GW (Diff between Consideration Paid and Investor’s share of FV of net assets) arising on an associate should be amortised

IFRS - Trans Costs exp to P&L
FRS102 -Transactions costs added onto Associate

Question 12

IAS 38 intangibles diff IFRS and FRS102?

Answer 12

Development Costs

IFRS - when criteria met, dev costs are capitalised
FRS102 - choice to capitalised or expense dev costs

UL of Intangibles
IFRS - intangibles can have an indefinite useful life
FRS102- All intangibles have definite UL, rebuttable presumption that this does not exceed 10 year

Question 13

IFRS 3 Business Combinations Goodwill - diff IFRS and FRS102?

Answer 13

GW

IFRS- GW not amortised / Annual Impairment Review
Gain on bargain purchase is recognised P&L

FRS102- GW amortised over UL
Negative GW is shown as negative on SFP

Question 14

IFRS 3 Business Combinations Acquisition costs diff ifrs and frs 102

Answer 14

IFRS - Expensed to P&L

FRS102 -added to consideration in GW calc

Question 15

IFRS 3 Business Combinantions - Contingent Consideration Diff ifrs and frs 102

Answer 15

IFRS - Include contingent consideration in GW calculations at FV. FV incorporates probability that it’ll be paid.

FRS102 - If probable include estimated amount of contingent consideration payable in GW calc

Question 16

IFRS 3 Business Combinations NCI diff ifrs and frs

Answer 16

IfRS - Choice of FV or proportionate method

FRS102- Proportionate method only

Question 17

IFRS 5 Discontinued Operations diff IFRS and frs 102

Answer 17

IFRS - discontinued operations are shown as 1 line in p&l, further detail in notes to FS

FrS102 - discontinue op shown in separate column in income statment

Question 18

IFRS 5 aaset held for sale diff ifrs and frs 102

Answer 18

Ifrs - when criteria met, held for sale are presented as current assets and stopped depreciation

FrS102 - no held for sale category so assets continue to depreciate until disposal

Question 19

Diff IFRS 9 Financial Instruments IFRS and FRS102

Approach and Impairment

Answer 19

Approach

IFRS- Classifies financial assets based on contractual cash flows and business model

FRS102- Adopts simplified approach. Investments in shares are FVPL and simple debt instruments are amortised cost

Impairment

IFRS- adopts expected loss approach

FRS102- Adopts incurred loss approach

Question 20

IFRS 10 When should a Sub be EXCLUDED from the Consolidated FS

Answer 20

FRS102- Subs should be excluded from consolidation where severe longterm restrictions apply or where sub is held exclusively for resale

Question 21

IFRS15 Revenue from Contracts with Customers

Answer 21

IFRS - Adopts 5 step approach (Identify Contract, Identify Perf Obligations, Determine Trans Price, Allocate Trans Price to Perf Oblig, Recognise Rev)

FRS102- splits revenue accounting into:
sale of goods, (Risk & Rewards tranf to Seller)
provision of services (Stage of Completion)
Construction contracts (Stage of Completion)

Question 22

IFRS 16 Leases Differences between IFRS and FRS102

Answer 22

IFRS- Lessees recognise an asset and a liability for all leases unless ST or of minimal value

FRS102- lessees classify leases as finance or operating lease. A Liability and asset is only recognised for Finance lease. Op Lease payments exp to P&L

Question 23

Companies Act - single entity

When is a company exempt from prepare individual FS?

(3)

Answer 23

Its a sub itself

Its been dormant throughout year

Parent is established under the law of an EU Economic Area (EEA) State

Question 24

If not subject to small comp regime, a parent must prepare group accounts for the year unless what?

Answer 24

If the Parent is a 100% Sub of another company

If all its subs are excluded from consolidation

• severe LT restrictions hinder right of the P over the assets pr management
• the information for preparation cant be obtained without huge exp or delay
• the sub is held only for resale

Question 25

What can small companies that use FRS102 exclude?

Answer 25

No OCI No Statement of Cash Flow Exempt from many disclosures req of FRS102

Question 26

What is FRS101?

Answer 26

Reduced Disclosure Framework - permits exemptions from disclosure requirements. Only applies to individual FS of P and S that normally apply IFRS. Cost and time savings without severely affecting quality of Financial Reporting. Full disclosures on group level found in consolidation - greater use for users.

Question 27

What is FRS105?

Answer 27

Financial Reporting Standard for Micro Entities Qualifies if: - Turnover is not more than £632K a year - Gross Assets not more than £316K - Average number of EEs 10 or less

Question 28

What the amendments of FRS105?

Answer 28

Prohibits accounting for: - Deferred Tax - Eq-Settled Share Payments prior to issue of Shares - Revaluation Model for PPE, Intang and Invest Prop - Capitalisation of Borrowing Costs - Capitalisation of Dev Exp as intangible Simplifies the rules around Financial Instruments as Debt or Equity Removed distinction between Functional and Presentational Currency

Question 29

What are the Qualitative Characteristics of Info under FRS102? (HINT: 10)

Answer 29

``` Relevance Materiality Prudence Substance over Form Reliability Cost vs Benefit Completeness Comparability Understandability Timeliness ```

Question 30

What are the Measurement, Accruals and Offsetting Rules under FRS102?

Answer 30

Measurement Basis: Historical Cost and Fair Value Prepared using Accruals Basis Offsetting not used unless a standard requires it

Question 31

What is a true and fair view OVERRIDE?

Answer 31

To comply with Companies Act, FRS102 allows a true and fair view override. If FRS102 does not provide this, directors must depart from the FRS102 standard to be able to give a true and fair view.

Question 32

Differences in Inventories between FRS102 and IFRS?

Answer 32

FRS102 - more guidance on what is included in Production OHs (includes site restoration costs if PPE on this site is used to make inventory) FRS102- reversal of inventory impairments. IFRS does not!

Question 33

Financial Instruments - Impairments - Differences between FRS102 and IFRS 9?

Answer 33

Impairments FRS102 - Uses Incurred Loss model, Only recognised if there is evidence that it actually occurred! IFRS - "Expected loss" - Recognises a loss for Amortised or FVOCI based on level of credit risk! Significant Risk - Lifetime Expected Losses Not Significant - 12m Expected Losses Recognised in SPL

Question 34

Joint Ventures under IFRS and FRS102?

Answer 34

IFRS - 2 types of joint control Joint Operation - Join the assets and liabs together (Normally joint control of asset) Joint Venture - Recognised under Eq Acctg (Normally control of a company) FRS102 - 3 Types of Joint Venture Jointly Controlled Operations - Each venturer contributes OWN assets for use by joint venture Jointly Controlled Assets - When venturers jointly control or own the assets. Jointly Controlled Entities - Establish separate entity under joint control (Equity Accounting)

Question 35

PPE - Estimate reviews of UL and residual values

Answer 35

FRS - Only review if evidence exists they have changed IFRS - review annually

Question 36

Provisions (Restructuring Costs) - Differences between IFRS and FRS102

Answer 36

FRS 102 - A Provision should be recognised when a legal or constructive obligation. IAS 37 - Prov, Cont Asset and Liabs - detailed guidance on provisions.

Question 37

Share-Based Payment - Differences between IFRS and FRS 102

Answer 37

FRS102 - When measuring FV of Equity Instruments there are 3 Tiers: Observable Market Prices Entity Specific Market Data Valuation using Market Data where poss Recognition - Rules to determine whether wholly cash or wholly equity - not split between debt and equity

Question 38

Employee Benefits - Differences between IFRS and FRS102 - Termination Benefits (Restructuring Costs)

Answer 38

IFRS - Recognise at earlier of: Date when entity no longer withdraw the offer Date when costs are measured under IAS 37 Provisions FRS102 - Only accounts for termination costs when it has a detailed formal plan and no change of withdrawal.

Question 39

Foreign Currency Translation - Differences

Answer 39

FRS102 does not have separate translation reserve for FOREX on translation of a sub FOREX not reclassified to P&L from OCI on disposal of Sub

Question 40

IAS 41 Agriculture Difference IFRS and FRS102

Answer 40

FRS102 can measure biological assets at FV or cost model (cost less acc depn and acc impairment) IAS 41 - only at FV - C2S. Remeasured to FV-C2S at each rep date. Gains and Losses to P&L

Question 41

Differences in Control for FRS102 and IFRS 10 Consolidate FS?

Answer 41

FRS102 - Control is power to govern financial and operating policies of entity to obtain benefits from it's activities. IFRS - Control is: Power over the investee Exposure to Variable Returns Can affect the returns through the power over the investee

Question 42

Control in Stages - Step Acquisition Differences between FRS102 and IFRS

Answer 42

IFRS - The residual interest is remeasured to FV FRS102 - Residual Interest is not remeasured

Question 43

Income Tax IAS 21 - Differs significantly in FRS102 and IFRS - HOW?!

Answer 43

FRS102 - Deferred Tax shown in SPL Timing Diffs are differences between taxable profits and total comp income that arise from inclusion of income and expenses in tax assessments in periods diff that those in FS. Defer Tax also recognised on diff between tax value ad FV of Ass and Liabs in a business combination. IFRS - SFP Diffs between amount recognised in entity's assets and liabilities and recognition of them by tax authorities FRS102 uses concept of PERMANENT DIFFERENCES - Certain income and exp are non-taxable. IAS12 uses Temporary Differences