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New accounting standards - how do they affect you?

13 January 2015
 

2015 is a year of change for accounting standards.  The current standards will be replaced by new standards which will apply for accounting periods commencing on or after 1 January 2015.

A comprehensive review of changes is outwith the scope of this article, but rest assured that Springfords are prepared for what is the largest change in accounting standards for many years!

There will be many changes in the way accounts are presented, and some changes to how the numbers are calculated, which will have a significant impact on the balance sheet total and reported profit or loss in a year for many companies. 

The most significant number changes likely to affect our clients are as follows:

  • Deferred tax will have to be provided on revalued assets (previously this was not provided unless there was a commitment in place to sell)
  • Goodwill arising on the purchase of a business will be subject to amortisation over a presumed life of 5 years or less unless the company is able to make a reliable estimate otherwise (previously this was 20 years or less)
  • Companies with investment properties will report changes in value from year to year through the profit and loss account (previously this was dealt with through a revaluation reserve and statement of total recognised gains and losses) and deferred tax will now have to be provided on the revaluation as above
  • Disclosure of lease commitments will now be the total lease payments to which the company is committed (previously this was just the payments due in the following year)

Small companies will be able to adopt the FRSSE (Financial Reporting Standard for Smaller Entities) which will delay many of the above changes, but it has been noted that ‘at some future date’ recognition and measurement requirements currently in the FRSSE will need to be amended to bring them in line with the new ‘full’ standards.  So the above changes are likely to affect all companies going forward.

There are also new simplified accounts available for so called ‘Micro-entities’, generally companies with turnover less than £632k, assets less than £316k and no more than 10 employees.

For further information on any of the above, please contact phutchison@springfords.com or your Springfords account manager.

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