This month’s podcast brings us up to speed with recent amendments to FRS 105, a significant compliance issue facing UK accountants in practice. AccountingWEB’s Tom Herbert talks to David Smith, director of assurance and financial reporting content from Mercia Group and Briony Kempton, product manager of advanced from Thomson Reuters. Together, they offer their perspectives on the changes to FRS105 and the impact they’re likely to have on accountants. They also discuss the points to consider when choosing between FRS 102 and 105.
Under UK GAAP, most micro-entities have the option of reporting under FRS 105, the financial reporting standard applicable to the micro-entities regime. Several small but important changes were made to the standard as part of the Financial Reporting Council’s triennial review, including two significant disclosures required by law.
Briony gives an outline of some of the amendments:
“The review did clarify some disclosure requirements. These were certain details about the entity, for example its registered number – also about giving discourse of off balance sheet arrangements, and they also require micro-entities to now give the average number of employees.”
David goes onto explain how his view of the changes: “One would hope that over the next few years the FRC (Financial Reporting Council) ask for feedback in one or two other areas in the micro-entities standard – it’s [currently] relatively short and sweet, but is perfectly imperfect in a couple of areas, therefore it could do with a little nudge forward with regards to some of the accounting concept”
“[FRS 105] is designed to be simple, obviously, but sometimes that simplification can be its downfall in terms of its application.”
He then explains the potential problem associated with the changes:
“…delivering a 2-side set of accounts to a client…is that going to prompt a question around ‘what am I paying you for?’ – that’s been a worry and a concern and meant that a number of firms have really begun to focus on that deliverable..”
Th updates to FRS 105 may mean more input is required from an accountant’s perspective, but David goes on to explain the positive side – “It allows them [more time] to sit down and talk to the client” in order to explain the extra information.
After discussing how the amendments are likely to impact micro-entities and their accountants, the trio wrap up the podcast by discussing the likelihood of any further changes anticipated for FRS 105.
Listen to the conversation in full by clicking the arrow below:
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