by John McCarthy Consulting Ltd. | Jul 15, 2024 | Blog, News
In March this year the Financial Reporting Council announced some important changes to FRS 102.
These changes are effective for accounting periods commencing 1 January 2026, with earlier adoption allowed. There are also supplier finance arrangements which come into effect for accounting periods starting on 1 January 2025, but these are not common in SMEs, and so they will not be discussed in this blog.
Revenue Recognition Changes
The 5 Step model is being introduced into FRS 102 and is based on IFRS 16 and provides a structured approach, with appropriate simplifications in FRS 102. Revenue accounting changes were also announced to FRS 105, but this article focuses on FRS 102.
The basic scenario is to recognise revenue when promises are made regarding when the control of the goods and services is transferred to the customer, rather than when the risks and rewards are transferred.
Clients will need to:
- Review the contracts that they have with their customers to identify each promise and understand what they’ve promised to do.
- Determine a transaction price for each transaction then allocate the transaction price to each promise made under the contract.
- Recognise the revenue as and when the client satisfies each of the promises under the contract.
Likely Impact
The impact will vary depending on the company’s accounting structure, size, and complexity of their business as well as the industry that the client operates in.
For example, clients in the retail or hospitality industries usually have more straightforward contracts with simple promises e.g. the sale of consumables/services, and there may be minimal changes.
In other sectors such as software, technology or communications there might be more significant impact as contracts in these sectors tend to be more complex, involving various deliverables or long-term arrangements and, in some cases, they can have multiple promises.
A simplification in FRS 102 allows companies to combine similar contracts using a portfolio approach as opposed to recognising contracts on a contract-by-contract basis.
Likely Changes
The most likely impacts will be in areas like:
- Key performance indicators like EBITDA;
- Sales targets;
- Incentives or bonus structures that are linked to revenue, which may then have a knock-on effect on
- Negotiations with customers;
- Pricing strategies;
- Debt covenants; and
- Interest cover.
It will be necessary to consider the wider implications of this standard sooner rather than later. A detailed review (including a detailed review of sales contracts and revenue streams) on accounting policies, contract structures, and operations will be necessary.
See our webinar entitled ‘The Main Changes in Irish GAAP’ on the latest changes to FRS 102 here.
For more on the whole ISQM process for audit firms, please see our ISQM 1 Toolkit on our website here.
Please go to our website to see our:
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
- ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by email at john@jmcc.ie.
- We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jul 9, 2024 | Blog, News
The Department of Children, Equality, Disability, Integration and Youth has recently issued a document called ‘Guidance Note for Core Funding Reporting Requirements Transitional Arrangements Year 1 and 2’ (“The Department Guidance Note”) to entities providing childcare and early education services. The document explains the transitional arrangements for the application for funding under a new funding model called ‘Together for Better’. These transitional arrangements will be in place for the years ended 31 August 2023 and 2024.
Reporting Regime
This reporting regime includes a requirement that the childcare service providers (“client”) engage a professional accountant to submit a document called an ‘Income and Expenditure Template.
The following is important to note:
- The report is to cover expenses incurred on a cash basis for the year ended 31 August 2023 and 1 August 2024.
- The requirement is for expenditure incurred in the relevant period only, no accruals or prepayments.
- Income will be pre-populated in the online platform.
- Where your client has a different year end, time apportionment is not permitted.
Important considerations for Accountants
- The accountant relies on information provided by the Service Provider, who is responsible for disclosing all relevant information.
- The Service Provider/client will make an online declaration on the platform provided by the Department that they have authorised the accountant to make the submission for them.
- Accountants are reminded of the relevant Code of Ethics issued by their professional body as regards avoiding conflicts of interest, independence, and avoiding making management decisions (among other threats).
- Accountants dealing with these grant claims will need to hold a practice licence and suitable professional indemnity insurance.
- If the accountant is also the Statutory Auditor of the entity Section 5.129 of the Ethical Standard for Auditors (2020) (issued by the Irish Auditing and Accounting Supervisory Authority) they are prohibited from providing accounting services where the services would involve the firm undertaking part of the role of management or initiating transactions.
The accountant should also refer to the Technical Alert Guidance documents issued by Chartered Accountants Ireland at TA 06/2023 Grant Claims and the International Standard on Related Service, ISRS 4400 (Revised) Agreed-Upon Procedures Engagements, which give guidance on engagement acceptance and continuance and some general advice on arranging the terms of engagement.
Please also refer to our newly published templates in this regard for:
Both are available on our website for €60+VAT each.
For more on AML related matters go to:
For more on the whole ISQM process for audit firms, please see our ISQM 1 Toolkit on our website here.
Please go to our website to see our:
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
- ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by email at john@jmcc.ie.
- We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jun 30, 2024 | Blog, News
UK engineering group Arup faced one of the world’s biggest known deepfake scams in Hong Kong last January 2024. Arup employs about 18,000 people worldwide and has annual revenues of over £2bn. The company was duped by cyber criminals who virtually cloned a CFO using video, audio, and other AI generated material. (You can read the full article by the Financial Times here.)
The scam happened after one Arup employee received a fraudulent message about a “confidential transaction” from a sender who claimed to be the UK-based Chief Financial Officer. The Arup staff member scheduled a video conference and, unbeknownst to him, met with a digitally cloned version of the CFO (and other fake employees) requesting financial transfers. After the video conference, the Arup staff member made 15 transfers to five Hong Kong bank accounts before discovering the scam. Arup suffered HK$200mn ($25mn) in losses to the cyber criminals.
Arup’s global Chief Information Officer, Rob Greig, warned that deepfake scams have been rising in both number and sophistication, and companies should learn from Arup’s experience and always be on the lookout.
In case you missed last week’s blog, the company size thresholds have been increased for accounting periods commencing on 1 January 2024, with the option to implement the increase for accounting periods commencing from 1 January 2023.
For a full list of the thresholds see our new publication here for €60+VAT.
For more on AML related matters go to:
For more on the whole ISQM process for audit firms, please see our ISQM 1 Toolkit on our website here.
Also, on our website we have:
- Letters of engagement and similar templates (all updated since May 2024) – Please visit our website here where immediate downloads are available in Word format here. A bulk discount is available for orders of five or more items bought together.
- ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by email at john@jmcc.ie.
We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements.
The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jun 30, 2024 | Blog, News
On 19 June 2024 the Minister for Enterprise, Trade and Employment, Peter Burke TD, signed into law the European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 which increases the balance sheet and turnover thresholds for ‘micro’, ‘small’, ‘medium’ and ‘large’ companies in the Companies Act 2014 by 25 per cent.
For a full list of the thresholds see our new publication here for €60+VAT.
This means that more companies will become ‘micro’ and ‘small’ categories and qualify for audit exemption and the ability to abridge their financial statements.
The regulations apply to financial years commencing on/after 1 January 2024, with the option to apply them to financial years commencing on/after 1 January 2023.
For more on AML related matters go to:
For more on the whole ISQM process for audit firms, please see our ISQM 1 Toolkit on our website here.
Also, on our website we have:
- Letters of engagement and similar templates (all updated since May 2024) – Please visit our website here where immediate downloads are available in Word format here. A bulk discount is available for orders of five or more items bought together.
- ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by email at john@jmcc.ie.
We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements.
The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jun 25, 2024 | Blog, News
A 2022 article warning private schools and universities that appeared on the law firm website Withersworldwide is worth noting. It warns private schools and universities that they are at particular risk of receiving the proceeds of bribery and corruption and legitimising them. These warnings also extend to the possibility of financing terrorism.
Anyone in a senior management position and, in particular, responsible for the financial side of a private school or university should ask themselves the following (non-exhaustive list of) ‘red flag’ questions about a payment:
- Is the payer native to, or resident in, a high-risk country?
- Are the funds coming from a foreign bank account?
- Is the payer a Politically Exposed Person (see Section 37 (10) of the Criminal Justice (Money Laundering & Terrorist Financing) Acts 2010 to 2021), subject to sanctions or designated as (or associated with) a proscribed organisation?
- Are the funds part of a complex or illogical arrangement, such that it is unclear who is making the payment, e.g. from an offshore company?
- Has the payer taken steps to conceal their identity? Has anyone in the organisation ever met the payer in person?
- Are the payer’s assets inconsistent with their known legitimate income?
- Is the payment made up of a disproportionate amount of private funding, bearer’s cheques or cash?
- Are significant amounts being offered (unnecessarily) in advance or is the school or university being put under pressure to complete the transaction quickly without good justification?
- Is any of the information provided by the payer suspicious (e.g. falsified) or has information been withheld?
- Is a refund being requested for an overpayment (and if so, to different accounts)?
Sometimes the answers to these questions will be perfectly reasonable and innocent. Remain on the alert to the potential ML and terrorism risks where the source of funds is unclear or concerning, especially where a payment would tick more than one of the boxes listed above.
For more on AML please see our Anti-Money Laundering Policies Controls and Procedures Manual on our website. — View the table of contents here.
Please go to our website to see our:
- Anti-Money Laundering Policies Controls and Procedures Manual (March 2022) — View the table of contents
- AML Webinar (December 2023) available here, which accompanies the AML Manual. It explains the latest legal AML reporting position for accountancy firms and includes a quiz. Upon completion you receive a CPD certificate for attendance in your inbox.
- Letters of engagement and similar templates—Please visit our website here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items bought together.
- ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard, please contact John McCarthy FCA by email at john@jmcc.ie.
- We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
