by John McCarthy Consulting Ltd. | Jan 4, 2019 | News
Suite of seven staff factsheets issued in December 2018
The
Financial Reporting Council (FRC) has issued a suite of seven staff factsheets
in December 2018 on aspects of FRS 102, including the 2017 triennial review.
These
become effective from 1 January 2019, with early adoption allowed under certain
conditions. They are available here:
Fact Sheet 1 – FRS 102: Triennial Review
2017 Amendments (PDF)
This factsheet consists of two parts: the first part outlines the five principal amendments that have been made while the second part outlines notable amendments by section. FRS 102 .
Fact Sheet 2 – FRS 102: Triennial Review 2017 Transition (PDF) – outlines the most notable amendments by section.
There are five other Factsheets which
are fully updated for the recent changes as follows:
Fact Sheet 3 – FRS 102: Illustrative Statement of Cash Flows (PDF)
Fact Sheet 4 – FRS 102: Financial Instruments (PDF)
Fact Sheet 5 – FRS 102: Property: Fair Value Measurement (PDF)
Fact Sheet 6 – FRS 102: Business Combinations (PDF)
Fact Sheet 7 – FRS 102: Transition to FRS 102
For more on the latest FRS 102 developments please see our webinar, ‘FRS 102 The New Regime from 1 January 2019’, here.
We have several other up to date webinars to choose from here with special offer prices for bundle purchases.
by John McCarthy Consulting Ltd. | Nov 22, 2017 | News
The new Companies (Accounting) Act, 2017 came into effect from 9 June 2017. It has brought with it, some strange consequences for micro-companies, in particular.
The Act brings into law a new accounting standard for measurement and presentation called FRS 105.
This essentially new accounting framework, among other things, 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 and regulated entities. It cannot be used by groups and cannot be used if the micro-entity is being consolidated.
Another issue that arises, is that financial statements prepared under FRS 105 are deemed to automatically give a ‘true and fair view’ without the addition of further explanatory notes beyond those set out in company law, under the Companies (Accounting) Act, 2017. FRS 105 is therefore deemed to be a ‘compliance framework’ and not a ‘fair presentation’ framework (as FRS 102 is). Letters of engagement and representation with clients, using FRS 105, will need amended to make this point clear. Amended letters are available by contacting us here.
Let’s explain these two types of accounting framework:
A ‘fair presentation’ framework (e.g. FRS 102) is one that requires compliance with the provisions of the framework but in addition that it acknowledges that in achieving fair presentation, management might have to make additional disclosures that are not specifically required by the framework and, in extremely rare circumstances, it might be necessary to depart from the requirements of the framework to achieve fair presentation of the entity’s financial position and performance in the financial statements.
A ‘compliance framework’, on the other hand, requires compliance with the provisions of the framework i.e. strict adherence to certain rules is required and the preparers of the financial statements have no choice but to follow the requirements of the framework.
To hear more about this and the latest Accounting Update, come to our next CPD course on Monday 27 November 2017 at the Talbot Hotel Stillorgan.
Click here for details and booking on all November 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 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.
by John McCarthy Consulting Ltd. | May 10, 2017 | News
FRS 102 – Interim relief for Treatment of Directors’ Loans
by John McCarthy
On Monday 8 May 2017, the Financial Reporting Council (FRC) issued a press release on director’s loan reporting for small companies. It has announced that it is withdrawing the requirement to find a market rate of interest where a loan is made on an off-market basis under Irish GAAP. This is an unusual move for the FRC, as it is making the change without consultation, presumably on the basis of demand from the profession.
In March, the FRC published Financial Reporting Exposure Draft 67 (FRED 67) which set out changes to FRS 102 as a result of the first triennial review, outlining potential changes to be made to director’s loans accounting. We will cover the changes in this FRED in a future blog.
The FRC has now responded to calls to create an interim optional exemption for small companies, allowing them to measure a basic financial liability that is a director’s loan initially at transaction price.
The FRC Press Release states: ‘A small entity, as an exception to paragraph 11.13, may measure a basic financial liability that is a loan from a director who is a natural person and a shareholder in the small entity (or a close member of the family of that person) initially at transaction price. Subsequently, for the same financial liability, a small entity is also exempt from the final sentence of paragraph 11.14.’
The measure announced applies to credit loans. The FRC has clarified that the interim measure will not apply to loans from small companies to their directors/shareholders i.e. debit loans.
As it is an interim measure, the amendment will be deleted as part of the finalisation of FRED 67, expected around January 2018. It will then be replaced with permanent requirements based on the proposal in FRED 67 after the outcome of the consultation process. The changes in FRED 67 are not expected to come into effect until periods commencing 1 January 2019, but early adoption may be allowed.
The FRC said: ‘Whilst it is usual for the FRC to consult formally on amendments to an extant standard, the FRC has concluded that this is not essential in this case as the amendment is only an interim measure, it merely defers for many entities the first-time application of an accounting policy of measuring such loans initially at present value and the permanent removal of this policy is already subject to an on going consultation.’
‘We have also explained that, in the context of owner-managed businesses in particular, many question the value of the notional interest charge to profit or loss in such circumstances, especially where the notes to the accounts adequately disclose the nature and terms of outstanding directors’ loans.’
For more on FRS 102 and the proposed changes in FRED 67 come to our next CPD course at the Talbot Hotel Stillorgan County Dublin on Monday 27 November. For more details and online bookings see here.
Other courses are also available at Ticket Tailor here.
