Jan 09 - Mind The GAAP: New Accounting Standards Come Into Force In UK
By Kevin Duarte
Gibraltar Accounting Standards will no longer mirror a live reputable accounting framework after the current UK Accounting Standards became obsolete and were replaced by a new set of standards (referred to as New UK GAAP) on the 1st January 2015.
Until these changes took place, Gibraltar Accounting Standards were essentially a mirror image of ‘current’ UK Accounting Standards. As a result, the Gibraltar Society of Accountants (GSA) is finalising a project that will see current Gibraltar Accounting Standards being replaced to mirror new UK Accounting Standards.
About New UK GAAP
New UK GAAP currently consists of four standards; FRS 100, FRS 101, FRS 102 and FRS 103.
FRS101 is eligible for qualifying entities that meet specific criteria. Companies that already apply IFRS or indeed IFRS for SME’s might not identify too many changes.
FRS 102 is the standard which all of the old FRS’s and SSAP’s have been transferred into and in some cases updated. We refer to some significant changes below:
Some significant differences between Old and New UK GAAP
a) Financial instruments – fair value rules do not apply to derivatives when adopting FRS 4. Under FRS102 basic instruments are measured at amortised cost and complex instruments, including equity and derivative instruments, at fair value through profit or loss.
b) Deferred tax – Under FRS 102 there is expected to be in an increase in deferred tax due to its recognition on asset revaluations and on assets and liabilities arising on a business combination (except goodwill).
c) Goodwill – Under FRS 102 this needs to be amortised. If a reliable estimate cannot be made then this should not exceed 5 years. FRS10 previously specified 20 years.
d) Investment properties – Under FRS102 fair value movements are taken to the profit and loss account instead of the statement of recognised gains and losses.
Cost model allowed under FRS102 if fair value cannot be obtained due to undue cost or effort.
e) Employee benefits – This area is wider in scope than current UK GAAP. Under FRS 102 all short-term employee benefits, including paid annual leave, should be recognised. Furthermore, at least one entity in the group defined benefit scheme needs to apply defined benefit accounting in its individual financial statements
Transition rules
FRS102 requires retrospective application with some exceptions. Meaning that companies applying FRS 102 for accounting periods commencing 1 January 2015 will have to restate their 2014 comparatives to comply with New UK GAAP requirements.
Making the right choice
Once the GSA has finalised their conversion project, companies currently applying Gibraltar GAAP can apply the following subject to eligibility:
1) IFRS as adopted by the EU;
2) Gibraltar Accounting Standards -FRS 101
3) Gibraltar Accounting Standards - FRS 102; or
4) FRSSE
When making this decision, people will need to consider the consequences on tax, one’s ability to pay dividends, one’s data and systems requirements, corporate structures, disclosure requirements and the timing of conversion.
Kevin Duarte
Senior Manager at PwC Gibraltar
Direct: +350 20073520 | Mobile: +350 56001086
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