FAR Chapter 20 UK GAAP

Which 3 accounting UK GAAP standards must company financial statements in the UK comply with?

1. FRS 100

2. FRS 101

3. FRS 102

What does FRS 101 allow?

FRS 101 allows companies that are part of a group preparing consolidated accounts under IFRS Standards to take certain disclosure exemptions in their individual accounts.

Does FRS 102 allow to companies that apply IFRS standards?

No

How many Conceptual Framework qualitative characteristics are included in IFRS and UK GAAP FRS 102?

IFRS - 6

FRS 102 - 10

FRS 102 does not differentiate between fundamental and enhancing qualitative characteristics

Which Conceptual framework identifies materiality, substance over form, prudence, balance between benefit and cost as separate qualitative characteristics? IFRS or UK GAAP?

UK GAAP - FRS 102

What is the difference in definition of an asset for IFRS and UK GAAP FRS 102?

IFRS - The Conceptual Framework states an asset has the ‘potential to produce economic benefits"‘

UK GAAP FRS 102 - FRS 102 Asset definition is: ‘expected economic benefits are expected to flow to the entity’.

What is recommended and is prescribed for financial statement formats for IFRS and UK GAAP?

IFRS - IAS 1 provides recommended formats.

UK GAAP - FRS 102 prepared in accordance with Companies Act 2006, therefore a prescribed format

What do IFRS and UK GAAP allow or not allow in place of a SOCI & SOCIE?

IFRS - IAS 1 does not allow a "statement of income and retained earnings" in place of the SOCI and SOCE.

UK GAAP FRS 102 - FRS 102 allows the option, in certain circumstances, to show a "statement of income and retained earnings" in place of the SOCI and SOCE.

What are the key phrases that depict financial statement presentation for IFRS and UK GAAP FRS 102

IFRS - Requirement for ‘fair presentation’ which is similar to Companies Act 2006 ‘true and fair view’.

An entity can depart from IFRS Standards to satisfy the fair presentation requirement, known as the ‘true and fair override’.

UK GAAP FRS 102 - FRS 102 uses the term ‘true and fair’ consistent with the Companies Act 2006. It also permits the use of the ‘true and fair override’.

NOTE: The terms ‘fair presentation’, ‘presents fairly’ and ‘true and fair’ can be used synonymously

What does IFRS and UK GAAP refer to NRV as?

IFRS IAS2 - Net realisable value (NRV) is based on a fair value achieved in an open market (industry view of expected sale price).

UK GAAP FRS 102 - Instead of referring to net realisable value (NRV), FRS 102 refers to the estimated selling price less costs to complete and sell.

The selling price is estimated by the specific entity (entity-specific approach).

What are the differences between how discontinued operations are presented for UK GAAP and IFRS?

IFRS - Discontinued operations are shown as one line on the SPL, with further detail provided in the notes to the accounts.

UK GAAP FRS 102 - In keeping with Companies Act 2006, discontinued operations are shown in a separate column in the income statement.

What is the UK GAAP FRS 101 exemption for presenting discontinued operations?

Follow IFRS presentation and exemption from disclosing cash flows from discontinued operations

What is the difference between UK GAAP and IFRS in presenting assets held for sale?

IFRS - When criteria are met, NCA HFS is categorised as current and no longer depreciated.

UK GAAP FRS 102 - No NCA HFS category exists, so assets continue to be depreciated up until disposal

What is the difference between UK GAAP and IFRS for revenue recognition?

IFRS - Adopts 5 stage approach

UK GAAP - Does not have a 5 stage approach although treatment gives similar outcomes to IFRS 15.

What is the difference between UK GAAP and IFRS for borrowing costs?

IFRS -Eligible borrowing costs must be capitalised.

UK GAAP - There is a choice to capitalise or expense borrowing costs.

What is the difference between UK GAAP and IFRS for development costs?

IFRS When the criteria are met, development costs must be capitalised

UK GAAP There is a choice to capitalise or expense development costs

What is the difference between UK GAAP and IFRS for useful lives of intangibles?

IFRS Intangibles can have an indefinite useful life (UL)

UK GAAP - All intangibles have a finite useful life (UL), with a rebuttable presumption that this does not exceed 10 years.

What is the difference between UK GAAP and IFRS for capital grants?

IFRS - Choice of using either the deferred income or netting off method

UK GAAP - FRS 102 prescribes the deferred income method only

What is the difference between UK GAAP and IFRS for Initial recognition of Financial Instruments?

IFRS - Initial measurement at fair value.

UK GAAP - Initial measurement at transaction price.

What is the difference between UK GAAP and IFRS for amortisation of goodwill?

IFRS Goodwill is not amortised but tested annually for impairment.

UK GAAP Goodwill amortised over useful life (UL) (10-year rebuttable presumption)

What is the difference between UK GAAP and IFRS for impairment reversal for goodwill?

IFRS - Impairment reversal not allowed for Goodwill.

UK GAAP - Impairment reversal allowed for Goodwill.

What is the difference between UK GAAP and IFRS for recognition of gain on bargain purchase?

IFRS - Gain on bargain purchase is recognised through the SPL

UK GAAP - Gain on bargain purchase is called negative goodwill and is shown separately in the asset section of the CSFP as a deduction from positive goodwill.

What is the difference between UK GAAP and IFRS for recognition of acquisition costs?

IFRS Acquisition costs are expensed to the SPL.

UK GAAP Acquisition costs are added to consideration.

What is the difference between UK GAAP and IFRS for choice of valuing NCI?

IFRS - Choice of fair value method or proportionate method

UK GAAP - Only the proportionate method is allowed.

What is the difference between UK GAAP and IFRS for exclusions from consolidated financial statements?

IFRS No exclusions allowed from consolidation.

UK GAAP - Subsidiary should be excluded from consolidation where severe long-term restrictions apply or where subsidiary is held exclusively for resale purposes.

What is the difference between UK GAAP and IFRS for recognition of goodwill for IAS 28 Investments in Associates and Joint Ventures?

IFRS No separate Goodwill recognised.

UK GAAP - Implicit Goodwill should be recognised and amortised.

What is the difference between UK GAAP and IFRS for IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors?

IFRS Does not comment on whether a change to the cost model when fair value can no longer be determined reliably is a change of accounting policy or not.

UK GAAP Change to cost model (when reliable measure of fair value no longer available) not to be treated as a change of accountancy policy

What is the difference between UK GAAP and IFRS for IAS 24 Related Party Disclosures?

UK GAAP Does not require disclosure of transactions entered into between 2+ members of a group (as long as subsidiary is wholly owned by other party).

What is the difference between UK GAAP and IFRS for recognition of normal lease terms and short term leases?

IFRS - All leased assets (of terms > 12 months) are now to be capitalised and recognised as ‘Right of use’ assets by lessees (unless ‘low value’).

Leases of ≤ 12 months are charged to the SPL on a straight line basis

UK GAAP - Distinction made between Operating and Finance leases.

A finance lease is a lease that transfers substantially all the risks and rewards of ownership to the party using the asset.

An operating lease is any lease other than a finance lease.

Finance leases are accounted for like ‘right of use assets’.

Operating leases are charged to the P&L a/c (income statement) on a straight line basis.

What is the difference between UK GAAP and IFRS for recognition of normal lease terms and short term leases?

IFRS - Proceeds arising from sale of items produced in the process of bringing PPE to the location/condition necessary are recognised in the SPL in the period earned

UK GAAP - These proceeds are deducted from the carrying amount of the PPE item.