What is UK GAAP?
UK GAAP is the technical term for the Generally Accepted Accounting Practice in the UK and is a regulatory body that defines how accounts and financial reports should be prepared.
The new UK GAAP was published in 2015 with updated standards that applied to all accounting periods starting on or after 1 January 2016. This introduction was aimed to make financial reporting easier and less expensive, whilst creating a more coherent set of UK GAAP accounting standards.
What is FRS 102?
FRS 102 is a replacement of the old UK GAAP system and applies to financial statements that are intended to give a realistic view of a businesses financial position and profit or loss for a period and has been amended to comply with the Companies Act.
FRS 102 is based on the International Financial Reporting Standards for small to medium enterprises – known as IFRS for SMEs and has been developed to reflect the accounting standard.
The key differences between UK GAAP and FRS 102 can be seen here…
Under FRS 102 there is no exemption from preparing a cash flow statement and this will have three cash flow classifications: operating activities, investing activities, and financing activities.
The useful economic life of intangible assets and goodwill is limited to periods of five years or less under FRS 102 if a reliable estimate cannot be placed.
Deferred tax is recognised on a revalued asset regardless of whether the item has entered into a binding agreement to sell or not, and the rate of calculation of this deferred tax is the same as the rate that would apply to dispose of the asset.
Abstracts such as “Currencies, languages, countries, and regions” have been combined into one element called “Dimensions Content”, which is a very efficiently designed taxonomy. There is also an addition to this section called the “Accountants Report”. Employee benefits are also different as under UK GAAP there’s no specific requirement to make accruals for unpaid short-term benefits such as holiday entitlement or unpaid sick pay, but specific requirements for reporting these entities are needed for auditing purposes at the end of the reporting period within the FRS 102.
There’s an accounting policy choice with regards to income from grants with a performance model where performance-related conditions have been met or the accrual model where income is matched to the related expense for grants either of which needs to be listed in the profit and loss account.
FRS 102 model accounts use international terminology and it is permissible to use alternative titles other than those referred to provided that they aren’t misleading.
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