by John McCarthy Consulting Ltd. | Oct 11, 2017 | News
Many accountants are involved in preparing the Reporting Accountants Report to the Law Society. It is quite an onerous and responsible task, and carries with it the requirement for compulsory professional indemnity insurance at a minimum of €500,000.
When accounting firms have a monitoring inspection from their regulatory body, it is quite often the files of their solicitor clients that cause the greatest difficulty during the review.
This upcoming seminar will cover several topics of interest to Reporting Accountants. For example, can you answer the following questions from your solicitor client?
‘I received a cheque from a client on the balancing date, the client ledger card was updated to show receipt of the money but the cheque was not lodged to the bank until two weeks later, why can’t the reporting accountant’s report, show this as an outstanding lodgement?’
‘Can a relative act as a reporting accountant?’
To find out the answers to these and similar questions, come along to our next seminar on the Solicitors Accounts Regulations. We will be joined by Seamus McGrath, FCA, Head of FInancial Regulation at the Law Society of Ireland.
This course will include
- Planning, executing and completing the assignment;
- Structuring the letter of engagement;
- Choosing sample sizes;
- A reminder of some key definitions and deadlines under the Regulations;
- How to manage mixed monies;
- Common problems the Law Society finds during reviews;
- The rules are for transferring money in/out of office/client/executor/insolvency accounts;
- The requirements for controlled and non-controlled trusts;
- Common mistakes and breaches and how best to avoid them;
- The letter of representation;
- Solicitors professional indemnity matters; and
- Money laundering issues in solicitors’ firms.
Wednesday 27 November 2017 9am to 12.30pm (Registration from 8.30am)
Location: Talbot Hotel Stillorgan (old Stillorgan Park Hotel), County Dublin
Price: €105 per person or €280 for three from the same office.
Delegate materials provided. Free parking at hotel.
Booking and further details at this link
by John McCarthy Consulting Ltd. | Jul 27, 2017 | News
The Companies (Accounting) Act, 2017 came into effect from 9 June 2017. It applies for accounting periods commencing on/after 1 January 2017 but early adoption of certain parts is allowed in Section 14 for accounting periods starting on/after 1 January 2015.
Early adoption of the relevant parts of the Companies (Accounting) Act, 2017 may look attractive, but there are several accounting and company law disadvantages also. Here we look at the pros and cons of adopting this legislation for the financial year commencing 1 January 2016, compared to postponing implementation to a financial year commencing 1 January 2017.
Illustrated below are some of the implications of early versus delayed adoption, for a ‘micro’, ‘small’ and ‘medium’ size company:
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Adopt new rules for accounting period commencing from
1 January 2016
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Keep old rules for accounting period commencing
1 January 2016
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Disclosure
- As best practice, include a note saying that the provisions of the Companies (Accounting) Act, 2017 have been early adopted.
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Disclosure
- Notes to the financial statements would remain silent about the Companies (Accounting) Act, 2017.
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Size thresholds
- Avail of the new ‘micro’ and ‘small’ company thresholds for audit exemption, abridged financial statements filing at the CRO and group consolidation exemption.
- The number of ‘small groups’ that don’t need to have an audit nor consolidate will grow under the new provisions.
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Size thresholds
- Cannot prepare ‘Micro’ company accounts and must follow the old thresholds for ‘small company’ abridged financial statements and the old consolidated financial statements exemption.
- See below for other positive impacts on ‘small’ entities.
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Adopt new rules for accounting period commencing from
1 January 2016
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Keep old rules for accounting period commencing
1 January 2016
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Micro company accounting
- Because the provisions of the Companies (Accounting) Act, 2017 have been early adopted, the Micro Entities Regime under FRS 105 is available to the company (provided it fulfils the ‘micro company’ size criteria) for the YE 31/12/2016, along with the rules in Schedule 3B of the amended Companies Act, 2014 which include:
- Exemption from disclosing in the shareholders’ and abridged financial statements the directors remuneration and directors’ debit and credit loans as set out in Sections 305-309 of the CA 2014.
- Exemption from producing a Directors Report and Statement of Cash Flows in both the shareholders’ and abridged financial statements
- File an abridged balance sheet with the notes only being required if the company has borrowings or guarantees.
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Micro company accounting
- FRS 105 and Micro Companies Regime in Schedule 3B of the Companies (Accounting) Act, 2017 is not available for the YE 31/12/2016.
- Must disclose in the shareholders’ and abridged financial statements the directors remuneration and debit and credit loans as set out in Sections 305-309 of the CA 2014.
- Exempt from producing a Directors Report but must produce a Statement of Cash Flows in both the shareholders’ and abridged financial statements.
- File the abridged financial statements under the unamended CA 2014 which requires more extensive notes than under FRS 105.
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‘Small’ entity Abridged financial statements
- Include all the notes from the Shareholders’ Accounts plus the ‘Statement of Changes in Equity’, and including P&L notes, even though the P&L itself does not get published.
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‘Small’ entity Abridged financial statements
- Retain the old rules for one last financial year so that you don’t have to include all the notes including the P&L notes in the abridged accounts.
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Employee numbers
- There is no longer any need to include the note about employee numbers broken into appropriate categories – this is a new exemption for ‘small’ entities introduced by the Companies (Accounting) Act, 2017.
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Employee numbers
- Need to include the note about employee numbers broken into appropriate categories.
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Adopt new rules for accounting period commencing from
1 January 2016
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Keep old rules for accounting period commencing
1 January 2016
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Fixed assets and reserves
- Drop the comparative expanded note for fixed assets and reserves and similar items in the shareholders’ and abridged accounts.
Statement of Cash Flows
- May exclude the Statement of Cash Flows under Section 1A of FRS 102 due to early adopting the Companies (Accounting) Act, 2017 and use Section 1A of FRS 102.
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Fixed assets and reserves
- Repeat the comparative expanded note for fixed assets, reserves and similar items in the shareholders’ and abridged accounts.
Statement of Cash Flows
- Include the Statement of Cash Flows under FRS 102 (excluding Section 1A) due to not early adopting the Companies (Accounting) Act, 2017.
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Medium companies
- Medium sized companies that early adopt the provisions of the Companies (Accounting) Act, 2017 will no longer be able to abridge their financial statements nor avail of audit exemption. They will also have to disclose their full profit and loss account with profit margins and turnover.
- Medium companies will now also be required to prepare group accounts as the exemption from preparing consolidated financial statements on the basis of size for Irish parent companies has been restricted to the ‘small’ company threshold.
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Medium companies
- Medium companies will retain the old size thresholds.
- Medium sized companies that do not early adopt the provisions of the Companies (Accounting) Act, 2017 will continue to abridge their financial statements and avail of audit exemption for the 2016 financial year.
- This may be of little benefit as when they file their financial statements for the YE 31/12/2017, the 2016 comparative numbers will get disclosed under the new rules.
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For a more detailed analysis of the effects, please call us for a specific consultation.
To hear more about the latest Company Law developments, come to our next CPD course on the topic on Wednesday 29 November 2017.
We also have other CPD courses in November 2017.
Click here for details and booking on all courses.
by John McCarthy Consulting Ltd. | Jul 27, 2017 | News
The UK Charities Audit Practice Note (PN 11) is the nearest available guidance that charity auditors in Ireland have to professional best practice for external audit work on charities and non-profit entities.
The latest version of PN 11 is currently out for consultation in a bid to improve the quality and effectiveness of the audit of charities. It updates the previous version, last published in 2012.
Charity audits are high risk. Auditors have always been expected to have relevant knowledge corresponding to the task in hand. The new proposals reiterate this point, requiring audit teams to have:
- suitable understanding of the type of charity being audited;
- the key risks affecting the charity;
- the applicable legislative framework;
- the principles of FRS 102;
- the Charities SORP (Statement of Recommended Practice);
- the charity’s governing documents, which may include specific reporting requirements;
- the legal responsibilities and duties of charity trustees, and
- the regulatory framework within which charities operate.
The main changes in the document are a response to the introduction of FRS 102 and the revised SORP accounting regime as well as other legislative changes in the UK. It is expected that Ireland will implement the FRS 102 Charity SORP sometime in 2018, once the legal requirements in the Irish Charities Act, 2009 are updated to include charities that are companies.
What is changing in PN11?
The new PN is much shorter than before– nearly half the length of previous versions –based on a policy decision from the Financial Reporting Council (FRC) to remove duplication of material from within the practice note and from the ISAs. It means that users may need to cross-refer more often in future to other sources of information.
Going concern
Going concern will be of special interest, as more charities face increasing funding pressures. The PN includes a revised list of events that may cast doubt on the going concern assumption, including the failure to meet reserve targets, and regulatory investigation.
Consultation closing date
The closing date for the consultation is 25 August 2017 and the ED is available at this link PN 11 exposure draft.
To hear more about the Accounting and Audit of Charities/Not for Profit Entities, come to our next CPD course on the topic on Thursday 30 November 2017.
We also have other CPD courses in November 2017. Click here for details and booking on all courses.
by John McCarthy Consulting Ltd. | Jul 27, 2017 | News
AML legislation in Europe is primarily driven by the European Commission and on 26 June 2017 the Commission published a press release highlighting the urgency of the existing AML rules to be implemented in each Member State by adoption of the Fourth AML Directive.
26 June 2017 was the deadline for implementing this Directive and the Commission has written to Ireland and 16 other EU countries that are late implementing the Directive. The only EU nations to provide full confirmation to Brussels that the measures were implemented on time were the UK, France, Germany, Italy, Spain, Slovenia, Sweden, Austria, Belgium, the Czech Republic and Croatia. Apparently, it is unusual for so many countries to miss the official entry into force of an EU law.
Implementation of this Directive is quite urgent and once in Irish law it will introduce the following changes:
- reinforce the risk assessment obligation for banks, lawyers, and accountants;
- set clear transparency requirements about beneficial ownership for companies (some of this has already commenced). This information will be stored in a central register, such as commercial registers, and will be available to national authorities and obliged entities
- facilitate cooperation and exchange of information between Financial Intelligence Units from different Member States to identify and follow suspicious transfers of money to prevent and detect crime or terrorist activities;
- establish a coherent policy towards non-EU countries that have deficient anti-money laundering and counter-terrorist financing rules, and
- reinforce the sanctioning powers of competent authorities.
A separate June 2017 report from the European Commission, identified 40 products and services that are particularly vulnerable to targeting by terrorists and other criminals seeking to launder money. They include crowdfunding platforms, virtual currencies, online gambling, real estate and charities/non-profit organisations.
To hear more about the latest AML developments and how to be on the alert for suspicions of money laundering and terrorist financing under the Criminal Justice (Money Laundering and Terrorist Financing) Act, 2010, come to our next Anti-Money Laundering course on Tuesday 28 November 2017.
All of our upcoming courses are listed here
by John McCarthy Consulting Ltd. | Jul 26, 2017 | News
The Companies (Accounting) Act, 2017 (CAA 2017) came into effect from 9 June 2017. Among other matters, it allows certain types of company called ‘micro companies’ use FRS 105, the Financial Reporting Standard applicable to the Micro-Entities Regime as well as allowing use of Section 1A of FRS 102 for certain types of ‘small’ entity. Similar legislation was adopted in the UK in July 2015.
The new law will have a significant impact for many private Irish companies in relation to audit exemption, financial reporting and disclosure of financial information. The new law may be early adopted by companies for accounting periods commencing from 1 January 2017 but may also be back-dated to accounting periods commencing as early as 1 January 2015. In a later post, we will look at some of the advantages and pitfalls of early adopting certain provisions in the CAA 2017.
Implementation of FRS 105 will mean that certain qualifying micro companies will not have to disclose details of directors’ remuneration, profit and loss account or include a director’s report in their filed financial accounts. Importantly the standard is not available to charities and not for profit entities, regulated entities and groups. It could be used by a ‘micro’ subsidiary within a group, that was being consolidated under FRS 102.
The new company size criteria under the Companies (Accounting) Act, 2017 are:
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‘Micro’
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‘Small’
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‘Medium’
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‘Large’
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Turnover
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Less than €700,000
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Less than €12m
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Less than €40m
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€40m or greater
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Balance sheet total (total assets, ignore liabilities)
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Less than €350,000
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Less than €6m
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Less than €20m
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€20m or greater
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Number of employees
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Less than 10
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Less than 50
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Less than 250
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250 or greater
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To file accounts under FRS 105 companies must satisfy two out of three criteria in the table above for two consecutive years, unless it is the first financial year of the entity.
Meanwhile in the UK, the HMRC have just published a paper on the tax impact of FRS 105. The document confirms that although FRS 105 itself is intended for companies and certain other entities, HMRC (and no doubt likewise the Irish Revenue) will generally accept calculations of profit for unincorporated businesses prepared under FRS 105, if they meet the size criteria to apply FRS 105.
To hear more about FRS 105, come to our next CPD course on the topic as part of the Update for the Busy Accountant on Monday 27 November 2017.
We also have other CPD courses in November 2017. Click here for details and booking on all courses.
by John McCarthy Consulting Ltd. | Jul 25, 2017 | News
For more on FRS 102 (including the new Section 1A for ‘small’ entities) and the proposed changes in FRED 67 come to our next series of CPD courses in the Talbot Hotel, Stillorgan, County Dublin starting on Monday 27 November 2017. Other courses are also available at Ticket Tailor here.
In its first review since 2013 of the new Irish GAAP, the Financial Reporting Council (FRC) has proposed changes to reporting of investment property, the definition of financial instruments and the treatment of directors’ loans.
It seems hard to believe that FRS 102, the latest version of which is September 2015, was originally published in March 2013. Meanwhile four years later, in March 2017, the FRC published Financial Reporting Exposure Draft 67 (FRED 67), setting out changes to the standard as a result of its first triennial review. FRED 67 contains some significant changes which are expected to become effective from 1 January 2019.
In this first of a two-part blog, we look at one of the main areas most likely to affect our readers.
Investment property
At present, FRS 102 requires that investment property should be measured at fair value through profit or loss, unless obtaining a reliable fair value on an ongoing basis would amount to ‘undue cost or effort’ (interpreted as only rarely applying, where it is practically impossible to locate a valuer), in which case it can be measured at cost. However, this provision has not always been applied correctly in practice.
The exposure draft states that entities may be treating the ‘undue cost or effort’ option as a free accounting policy choice and states clearly that this is not the case. FRED 67 suggests removing the ‘undue cost or effort’ exception entirely, meaning that investment property will always, with one exception, need to be held at fair value. The exception is for property let out to another group member, where the FRED introduces an accounting policy choice between cost/fair value.
Where investment property is partly let out to a group member and partly let out to an external party, the property will need to be split between the two and the externally let portion must be shown at fair value.
The proposals mean that the requirements for investment property accounting will become tougher than they are at present, while there is some welcome relaxation of the requirements in group situations.
Other proposals relate to financial instruments, intangible assets and small entity directors’ loans. We will cover these in another a blog very soon.
It is expected that the updated version of FRS 102 will be published in late 2017 in time for use for accounting periods commencing on/after 1 January 2019, with early adoption expected to be allowed for accounting periods commencing on/after 1 January 2018.
Exposure draft FRED 67
For a copy of the 142-page exposure draft go to this link FRED 67, Draft amendments to FRS 102 Financial Reporting Standard applicable in the UK and Republic of Ireland, Triennial review 2017.
For more on FRS 102 (including the new Section 1A for ‘small’ entities) and the proposed changes in FRED 67 come to our next series of CPD courses in the Talbot Hotel, Stillorgan, County Dublin starting on Monday 27 November 2017. Other courses are also available at Ticket Tailor here.
