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Compiling a set of FRS 105 accounts

John revisits some things to watch out for when compiling a set of FRS 105 accounts and the main differences from FRS 102.

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FRS 105

Transcript of Video – Compiling a Set of FRS 105 Accounts

This transcript was created using AI and may contain some mistakes.

I suppose then just FRS 105 generally, um, so as I said, when I’m doing, if I’m looking at FRA 105, I always think well what are FRS 102 rules because I’m so used to FRS 102 rules, I suppose. And then, well, look, FRS 105 what are the differences.

So then I have in my head, well, I need to consider this from an FRS105 perspective. It’s just helps it is when you’re moving in the practice from FRS 105, to FRS 102 for various types of clients. So effectively there’s no fair value or no revaluation of assets. They all have to be, have a cost.

So if you want that, as you were saying, and Mike, if you want that, well, then, you know, the clients, it’s not, not to science, it’s the clients decision. whether they wanted to go in, but it probably wants you to, because you know, the balance sheet will affect you not have the high values that they might might want to get to.

If they want to fair value, there is always the option. You can always move from your FRS 105, to FRS 102, whether it’s 1A or full FRS 102. But I suppose it’s more an exercise to do it again, um, that might incur costs. So it’s not a, it can be FRS 105,

but it’s not the end of the world. You can transition over and you have the transitions. But I suppose it depends on, on the client’s idea if he’s not sure what I think I’m going to be like this for awhile. So, you know, it’s cheaper to put together FRS 105 set of accounts potentially .Then a section 1A or FRS 102.

Um, again, all items is recognizing on the balance sheet and historic costs, as we said, if development expansion must be expensed, So if you’re a new company, well, I want to make sure my balance sheet is looking well. Well, FRS 105 is probably not the way to go because you can’t capitalize it. We know in FRS 102, section 18,

you can capitalize. If you meet certain conditions of that standard investment property, again, cost less depreciation. So they no, no fair value. Which is good and that’s why FRS 105 is so simple because you don’t have to worry about all these intricacies that are there, but for some people, they like these because the improved balance sheets, it goes the other way as well in disapproval.

But even if this improves here, you have to take it, this improvement here as well, because it’s always cost us impairment, uh, profits appreciation and impairments in order for deferred tax, to be recognized in FRS 105 set of accounts. So yeah, if you are transitioning back from FRS 102 to FRS 105, you need to be stripping that out.

And again, as with any transition exercise, if you’re transitioning back or transitioning to our FRS 102, you will go to the start of the comparative period and make adjustments then. And if you’re any, adjustments for the comparative period make adjustments there as well, uh, as we’re all aware from the FRS 102 transition, um, back a number of years ago,

uh, borrowing costs, you can must be expensed, more entities. That size would be there, wouldn’t be capitalizing anyway. So it wouldn’t be the end of the world. Um, lease, uh, incentives to realise over full life lease. That’s the same as FRS 105 in relation to, um, equity set to share-based payments, not recognized until issued.

So that is different from FRS 102. But again, during a FRS 105, you’re probably not likely to have that, that situation. Um, Goodwill impairments, cannot be reversed, once they’ve been carried out. The other thing to be aware of for FRS 105, as we know,

um, on, on coming on board for periods beginning on after first of January 2019, uh, the try triennial review comes into play. So the March, 2018 version of the FRS 105 is applicable for your 31st December 2019 year ends. So we did that on previous webinars and we went through, but the key point here from the point of view of FRS 105 is the close company surcharges now to be recognized in a year,

it arises regardless of the fact that a dividend might be paid within 18 months to avoid it. So it’s, it’s common, bring it into rules in line with FRS 102 effectively. So just watch it. If you are doing it FRS 105 this year, and that you look back and you see you look, and, or we didn’t accrue the surcharge last year,

because, you know, we said it was probably just, they’ve not going to be made, but actually you will have a prior your adjustment, assuming it’s material again its always material, uh, this year, then to reflect that it started with part of year what the close company surcharge should have been at the end of the comparative year. And then you recognize it in the current year as well,

so that is one to be just conscious of, if you are, are in this realm, assuming it’s material,

What are the ones to watch there John? The likes of investment property companies, consultancy companies that might have investment properties, because they’re not using, I want you to use costs to other, with fair values.

Yeah. That’s a, uh, an investment type income. So,

you know, you’re client to investment income potentially, you know, uh, interesting combining like that, where you have your surcharge at a predicable that you just want to consider that it is an FRS 105 set of accounts. So we talk about disclosures, so technically there is an adjustment, a prior year adjustment it is a year prior just not doing it due to an error issue to a,

a new standard coming into play. So you would have some disclosures in relation to it because it will impact your P & L reserves in relation to it. See what, you know, you would have some disclosure not near what you would have in FRS 102 But there will be disclosures from that perspective.