The Financial Reporting Council’s new suite of financial reporting standards (FRS) now apply to UK companies that are preparing their accounts for periods starting on or after 1 January 2015.
The new regime is a complete overhaul of the previous system, replacing it with four new standards in an effort to consolidate and simplify UK standards as well as harmonise them with international standards. Industry experts are hailing this as the most significant change to UK accounting in the last 10 years — the new standards are not just a shift in policy, they usher in a whole new framework.
Failing to comply with the standards could result in misplaced funds, fines, prosecutions, and a general drain on profits and productivity. The four standards are listed below:
1. FRS 100 Application of Financial Reporting Requirements explains which standards apply to which companies.
2. FRS 101 Reduced Disclosure Framework allows subsidiaries and parent companies to use IFRS with reduced disclosures.
3. FRS 102 The Financial Reporting Standard outlines the new UK accounting standards, replacing current FRSs.
4. FRS 103 Insurance Contracts consolidates accounting and reporting requirements for companies with insurance contracts in the United Kingdom and Ireland that are applying FRS 102.
While companies are not legally obligated to adopt the new regime until the end of 2015, there are benefits to making the transition early, such as maintaining clean records to avoid misplacing funds, conducting business with updated financial instruments, and managing foreign business more effectively with the new foreign currency translations. For more detailed information on the new standards, click here: www.frc.org.uk/Our-Work/Codes-Standards/Corporate-reporting/The-future-of-UK-GAAP.aspx.