Cutting through UK GAAP - KPMG US LLP | KPMG | US
Cutting through UK GAAP
KPMG's guide to the new financial reporting regime
Second edition
uk
2 Cutting through UK GAAP
Foreword
New UK GAAP is now in force, applicable for periods beginning or after 1 January 2015; we are now within the first period of mandatory application. New UK GAAP replaces the previous, long-standing UK accounting standards and comprises a multiplicity of separate accounting frameworks, all of which are part of New UK GAAP. Much of their effect will be comfortable and familiar, but there is also much change. Entities that were previously required to apply EU-IFRS by applicable law and regulation continue to do so. Other entities are able, subject to eligibility, to choose to prepare their financial statements in accordance with EU-IFRS, FRS 101, FRS 102 (including, when relevant, FRS 103), the FRSSE (replaced for periods beginning on or after 1 January 2016 by FRS 102 with a different disclosure regime for small entities), or the micro-entities standard (FRS 105). For subsidiaries of entities preparing EU-IFRS consolidated financial statements, the application of FRS 101 in particular allows the use of accounting policies that are more consistent with those of the group, without the perceived burden of applying the full disclosure requirements of EUIFRS. Groups can elect for some of their subsidiaries to apply FRS 101 and others FRS 102, since both will be `Companies Act accounts'. If they have not already done so, those charged with governance will need to make important decisions about which accounting framework to apply. This will require not only consideration of the available accounting options, but also assessment of the potential effect on accounting systems, staff training, taxation and other arrangements such as loan covenants. They will also need to consider the potential effect on distributable profits. In this publication, we summarise the requirements of each of the new standards FRSs 100, 101, and 102. In addition, we highlight the key accounting differences between FRS 102, previous UK GAAP and EU-IFRS, in order to inform those deciding which standards to apply and to ease the transition to FRS 102 for those that choose to apply that standard. We do not discuss the requirements of FRS 103 Insurance Contracts in any detail but do consider its scope and principal differences from previous UK GAAP and EU-IFRS. In this, the second edition of this publication, we have included examples to illustrate the application of the requirements of FRS 102, as well as our interpretation of those requirements in a number of areas in which the standard is not explicit, necessitating judgement to apply them appropriately. As FRS 102 is a new financial reporting framework, common practice and interpretation continue to evolve and we will update future editions of this publication to reflect that body of experience as it develops, which may be influenced both by past UK GAAP practice and evolving IFRS application. A new GAAP, applicable to tens of thousands of entities all at once, is an exciting and challenging prospect. 2015 will be a year of both choice and reckoning for many as they navigate those changes. We trust that this publication will assist you in understanding those choices and we look forward to helping you to rise to the challenge. Tony Cates Head of Audit, KPMG in the UK
? 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the United Kingdom.
Contents 3
Contents About this publication................................................................................................................. 5 Acknowledgements................................................................................................................... 5 Other ways KPMG professionals can help.................................................................................. 5 Abbreviations............................................................................................................................. 6 Introduction................................................................................................................................ 7 01Application of financial reporting requirements...................................................................... 8 02 Reduced disclosure framework........................................................................................... 18 03 Scope, concepts, principles and presentation..................................................................... 22 04 Statement of financial position (Balance sheet)................................................................... 32 05 Statement of comprehensive income and income statement............................................. 36 06 Statement of changes in equity and statement of income and retained earnings................ 44 07 Statement of cash flows...................................................................................................... 48 08 Notes to the financial statements........................................................................................ 54 09 Consolidated and separate financial statements................................................................. 58 10 Accounting policies, estimates and errors............................................................................ 70 11 Basic financial instruments....................................................................................................74 12 Other financial instruments.................................................................................................. 94 13 Inventories..........................................................................................................................112 14 Associates..........................................................................................................................118 15 Joint ventures.................................................................................................................... 126 16 Investment property.......................................................................................................... 132 17 Property, plant and equipment........................................................................................... 136 18 Intangible assets other than goodwill................................................................................. 144 19 Business combinations and goodwill................................................................................. 150 20 Leases............................................................................................................................... 158 21 Provisions and contingencies............................................................................................ 166 22 Liabilities and equity.......................................................................................................... 180 23 Revenue............................................................................................................................ 192 24 Government grants............................................................................................................ 202 25 Borrowing costs................................................................................................................ 206 26 Share-based payment........................................................................................................ 212
? 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the United Kingdom.
4 Cutting through UK GAAP
27 Impairment of assets ........................................................................................................220 28 Employee benefits.............................................................................................................230 29 Income tax......................................................................................................................... 242 30 Foreign currency translation.............................................................................................. 252 31Hyperinflation..................................................................................................................... 260 32 Events after the end of the reporting period......................................................................266 33 Related party disclosures..................................................................................................270 34 Specialised activities.........................................................................................................278 35 Transition to FRS 102..........................................................................................................308 36 Insurance contracts........................................................................................................... 316 Appendix I: List of standards and interpretations referred to in this publication...................... 322 Appendix II: Common profit and loss account and balance sheet formats from Schedules 1 and 6 to the Regulations........................................328
? 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the United Kingdom.
About this publication 5
About this publication
This publication summarises and discusses the requirements of FRS 100, FRS 101 and FRS 102 and notes the main differences between FRS 102, previous UK GAAP and EU-IFRS. It does not consider either the micro-entities standard (FRS 105) or the FRSSE (or its replacement, new Section 1A Small Entities of FRS 102). It also does not discuss the disclosure requirements of FRS 102 in any detail. It includes consideration of the scope of FRS 103 and the principal differences from EUIFRS and previous UK GAAP. Although it includes an overview of the requirements of FRSs 100 to102, this publication is an interpretative guide to those FRSs that builds on the standards and should be read alongside them. When the standards are silent on a particular matter, we discuss different acceptable accounting treatments. We use the phrase `in our view' if we believe that only one accounting treatment is appropriate. The publication is organised into chapters that generally correspond to the relevant section of FRS 102 (Chapters 3 to 35). Chapters 1 and 2 consider FRS 100 and FRS 101 respectively; Chapter 36 considers FRS 103. This publication includes the following paragraph/section references: ? x.x (e.g. 3.1) ? paragraph of the main body in this publication ? pUKx.x (e.g. pUK3.1) ? paragraph of comparison to previous UK GAAP in this publication ? IFRSx.x (e.g. IFRS3.1) ? paragraph of comparison to EU-IFRS in this publication ? FRS10x.x.x (e.g. FRS102.3.1) ? paragraph of the relevant standard ? FRS10x.ACA.xx (e.g. FRS102.ACA.92) ? paragraph of Accounting Council's Advice on the relevant standard ? FRS10x.GL ? glossary of the relevant standard ? FRC CS ddmmyy ? FRC clarification statement and relevant date of issue ? FRC SENxx - FRC staff education note and number ? Chapter x (e.g. Chapter 3 Scope, concepts, principles and presentation) ? chapter in this publication ? Section x (e.g. Section 3 Financial statement presentation) ? section of the standard FRS 102
Acknowledgements
We gratefully acknowledge our technical team in the Department of Professional Practice of KPMG in the UK (UK DPP) as primary authors of this book. The project has been led by Lynn Pearcy, Steve Hubbard, Karen Duncan and Gina Desai.
Other ways KPMG professionals can help
This publication has been produced by UK DPP. There is a range of publications and guidance published by UK DPP and KPMG IFRG Limited that is available to assist you further, including: ? Illustrative financial statements prepared under each of FRS 101 and FRS 102 ? Insights into IFRS ? provides practical guidance on the application of IFRS ? IFRS Handbooks ? include extensive interpretative guidance and illustrative examples to elaborate on or clarify the
practical application of IFRS ? e-learning modules on FRSs 100-102 from the KPMG Learning Academy. For access to an extensive range of accounting, auditing and financial reporting guidance and literature, visit KPMG's Accounting Research Online. This web-based subscription service can be a valuable tool for anyone who wants to stay informed in today's dynamic environment. For a free 15-day trial, go to aro. and register today. For further information see uk or ifrs.
? 2015 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in the United Kingdom.
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.
Related download
- accounting for income taxes kpmg
- wonderful malaysia berhad 2019 kpmg
- new on the horizon financial statement presentation kpmg
- accounting research aro com
- ifrs practice issues replacement of a share based kpmg
- executive summary the application of ifrs kpmg
- kpmg s accounting research online
- cutting through uk gaap kpmg us llp kpmg us
- christine i wiedman kpmg professor of accounting macc ba