FRS102 – A Time for Action

 Topic

Current Irish GAAP

FRS102

Primary Statements

Profit & Loss Account

Income Statement

Balance Sheet

Statement of Financial Position

Statement of total recognised gains & losses (STRGL)

Statement of Comprehensive Income. This may be included in the Income Statement to show a single Statement of Comprehensive Income

Shareholders’ Funds

Statement of changes in equity

Cash flow statement

Statement of Cash Flows – cash flows classified as operating, investing or financing

Government Grants

Recognition of grant income in P&L and matches to the related expense

Recognise in Income when performance related conditions are met (performance model) or recognise in income when related expense incurred (accrual model)

Goodwill

Capitalised and amortised over useful life. Useful life can’t exceed 20 years

Amortised and assumed to have a definite life, with a default period of 10 years if the useful life can’t be reliably determined

Investment Property

Open market value with adjustments recognised in the STRGL

Recognised at Fair Value at reporting date in Balance Sheet and recognise changes through the P&L account. Where there is no reliable Fair Value or it involves excessive cost or effort they are accounted for at cost less accumulated depreciation and impairment losses

Intangibles

Internal intangible assets can be recognised provided it has a readily ascertainable market value. Intangible assets may be deemed to have an infinite life and thereby not be amortised, if so it will undergo an annual impairment review. Intangible assets may be revalued

Internal intangibles must be identifiable (capable of being separated and transferred or derived from contractual terms) & meet the “Probability of future economic benefits” test. Internally generated brands, logos, customer lists & similar assets cannot be capitalised. Start-up costs cannot be capitalised. Intangibles cannot have an infinite life, if life span cannot be determined it is presumed to be 10 years. Recognised Intangibles shall be measured at cost less depreciation or option to use Fair Value if there is an active market by Fair Value.

Corporation Tax

Provide for CT at 12.5% and only provide for section 440 surcharge when paid

Provide for CT at the rate reflecting the section 440 surcharge unless the dividend is reflected in the Financial Statements

Deferred Tax

Uses timing differences based on amounts recognised in the P&L to amounts recognised in the Tax return. Discounting to reflect “time value” is permitted. Unrelieved losses and other deferred tax assets only recognised if it is probable will be recovered against reversal of Deferred Tax Liabilities or future taxable profits.

Discounting of deferred assets / liabilities not permitted. Provide for deferred tax on timing difference. Provide for on revaluation of Fixed Assets (including investment property) and quoted shares. The tax rate to use will depend on how the asset will be realised, through use or by sale.

Property / Plant & Equip usually - CT rate of 12.5%.

Non depreciated assets (Land) - CGT rate of 33%. Investment Property – CGT rate of 33%.

Quoted Shares – CGT rate of 33%

Foreign Currency Transactions

Permits choice of the spot rate or the forward contract rate for FX transactions. Closing FX assets & Liabilities can be valued at the closing rate or the forward contract rate.

All transactions must be measured at the spot (or average) FX rate ruling at the date of the transaction. FX monetary assets & liabilities must be translated at the closing rate and a gain or loss taken to the Income Statement. FX gains & losses are recognised in the Income Statement.

Accounting Policies, estimates and errors

Only Fundamental errors detected in subsequent years are restated as prior year adjustment in prior years accounts

Material errors detected in subsequent years are restated as prior year adjustment in prior years accounts

Holiday pay

Not generally accounted for.

Holiday pay to be recognised as an accrual or prepayment as appropriate