Introduction

About Leonard Curtis Business Solutions Group (“LCBSG”)

• National firm with 15 offices including new locations at Southampton and Kings Langley

• Over 170 staff and 30 Insolvency Practitioners

• Not part of an accountancy practice therefore Independent and Director-led

What makes us different?

• Specialists in the SME market i.e. your client base

• Much more than just insolvency – we have a wide range of service lines aimed at business rescue and insolvency avoidance

• Our Lifecycle network

Seminar content

Lifecycle update

Spring accounting update – Valerie Steward from Park Seminars

• Updates to FRS 102

• Main issues

Questions

Lifecycle

• The network through which LCBSG provides specialist services to you and your clients enabling you to service their needs throughout their lifecycle

• Differentiation remains insolvency-avoidance and much more

The Lifecycle offering

What does Lifecycle offer?

For your clients

• A “menu” of specialist LCBSG services that may be non-core to you including:

• In-house legal advice on most corporate and commercial areas

• Finance raising and debt advisory

• Specialist property expertise

• Corporate and personal insolvency

• Allows you to broaden your offering and satisfy a greater range of client needs

For you

• No cost of membership

• Access to technical expertise, discounted services and exclusive benefits

• Opportunities for reciprocity

Key benefits

Free CPD training

• Full programme of free events at venues across the UK – schedule confirmed to September 2018 and available to book on line

• 1½ hour sessions delivered by external specialists

• Suggestions for future seminars welcome

My-MVL

• Bespoke software for MVLs of cash shells where creditors paid and tax planning concluded which enables the accountant to take control

• Simple process and no need for formal meetings

• Fixed cost of £2k + VAT (inc disbursements) plus any Accountant’s costs

Key benefits

Discounted company formation and compliance services through BTC

• Company formation and company secretarial services

• Competitively priced plus Members’ discounts of at least 25%

• Company secretarial advice

• Online anti-money-laundering checks – cost-effective and no need to bulk-buy

• Advice on all compliance and regulatory issues including new AML legislation –may not be available elsewhere

Access to competitive Professional Indemnity insurance scheme

• High level of cover at competitive rates

• Simple process where fees less than £1m pa

• Specialist advice and bespoke cover where requirements are more specific or turnover higher

03300 242 333

www.lclifecycle.co.uk

Spring Accounting Update 2018

Presented byValerie Steward BSc ACA FCCA FRSA

Consultancy

Contents

• Updates to FRS 102

– For 2017

– Triennial review 2017 amendments for accounting periods beginning on or after 1 January 2019

– Final version published in December 2017

– Early application is permitted provided that all the amendments to this FRS are applied at the same time

– Current options for small entities

• Main issues

Consultancy

FRS 102 update – applying for periods commencing on or after

1 January 2017

• Relatively few changes

• FRS 101 – notification of shareholders – lack of clarity and hence requirement has been removed

– Also applies to FRS 102

• FRS 102 – fair value hierarchy disclosures

– Simplified for financial institutions and retirement benefit plans only

Consultancy

FRS 102 update – applying for periods commencing on or after

1 January 2017

• FRS 102 – Directors’ loans – optional interim relief for small entities

• The option to measure a loan from a director-shareholder (or a close member of family) at transaction price rather than present value

• Deferred this aspect of FRS 102 for small entities for one year and then will be in revised standard

Consultancy

FRS 102 update

• Many small editorial but main issues

• Will apply for accounting periods commencing on or after 1 January 2019 but can apply early

• The removal of undue cost or effort exemptions, which are replaced by accounting policy options where relevant

– An accounting policy choice is proposed for entities that rent investment property to another group entity to measure that property either using the cost model or fair value model

– But not for other investment properties

Consultancy

FRS 102 update

• The introduction of a description of a basic financial instrument– A debt instrument not meeting the conditions in

paragraph 11.9 shall, nevertheless, be considered a basic financial instrument if it gives rise to cash flows on specified dates that constitute repayment of the principal advanced, together with reasonable compensation for the time value of money, credit risk and other basic lending risks and costs (e.g. liquidity risk, administrative costs associated with holding the instrument and lender’s profit margin). Contractual terms that introduce exposure to unrelated risks or volatility (e.g. changes in equity prices or commodity prices) are inconsistent with this

– More examples given in the standard

Consultancy

FRS 102 update• More flexible guidance on the recognition of

intangible assets separately from goodwill in a business combination

– Entities may, on an asset-by-asset basis, choose to separately recognise additional intangible assets acquired in a business combination if this provides useful information to the entity and the users of its financial statements

– When an entity chooses to recognise such intangible assets separately from goodwill, it shall apply that policy consistently to the relevant class of intangible assets

• An amendment to the definition of a financial institution

Consultancy

FRS 102 update

• Amount of inventory charged as an expense is deleted

• Statement of compliance with 1A required on the balance sheet

• Encouraged disclosure now at 1A section E

Consultancy

FRS 102 update

• Payments by subsidiaries to their charitable parents that qualify for gift aid

• For a subsidiary of a charitable parent, the draft amendments to FRS 102 propose to require the tax effects of a gift aid payment that it is probable will be made in the nine months following the reporting date to be taken into account at the reporting date

• This will reflect the fact that in most cases such entities will minimise their liability for corporation tax as a result of making gift aid payments

Consultancy

FRS 102 update

• In addition it has been clarified that:

– The gift aid payment, as a distribution to owners, shall not be accrued at the reporting date (unless a deed of covenant is in place) and shall be recognised in equity; and

– The tax effects of the gift aid payment shall be recognised in profit or loss

Consultancy

FRS 105 update

• Company registration details

• Details if being wound up

• Off balance sheet arrangements

• Employee numbers

Consultancy

Accounting choices

• Micro

• FRS 102 1A

• FRS 102

• IFRS

Consultancy

Micro-entity accounts

• A micro-entity company must meet at least two of the three following conditions:

– Turnover not more than £632,000

– Balance sheet total not more than £316,000

– Average number of employees not more than 10

• Like for small company

Consultancy

Micro-entity accounts – Other

• Micro-entity financial statements prepared in accordance with the legally required minimum are presumed to give a true and fair view and hence the directors do not need to consider any additional disclosure requirements

• However, where the directors choose to make the additional disclosure requirements, they must do so in accordance with FRS 102, Section 1A

Consultancy

Micro-entity accounts – Other

• A subsidiary included in consolidated group accounts by the method of full (as opposed to proportional) consolidation cannot qualify as a micro-entity

Consultancy

Micro-entity accounts – Other

• A parent entity can only qualify as a micro-entity for the purposes of its individual accounts if it qualifies as a micro-entity individually and the group headed by it qualifies as small

• Also, a parent entity that prepares group accounts cannot qualify as a micro-entity for the purposes of its individual accounts

Micro-entity accounts – Other

• Can apply to unincorporated businesses

• No accounting policy options are available

• Borrowing costs and development costs must be expensed to the profit and loss account in the period in which they are incurred

• Government grants must be recognised on the accruals basis

• No accounting for deferred tax

Consultancy

Micro-entity accounts – Other

• No accounting for equity-settled share-based payments prior to the issue of the shares

• Further simplifications to the recognition and measurement requirements, including the accounting for post-employment benefit plans, financial instruments, and foreign currency transactions

Consultancy

Small company accounts

Size limits

• Turnover £10.2m

• Assets £5.1m

• Employees 50

Consultancy

FRS 102 1A – for small entities

• Separate presentation and disclosures based on final UK legislation implementing the EU directive

• Simplified accounts for members and filing at Companies House

• Accounting treatment same as FRS 102 but simplified disclosure

Consultancy

• Profit and loss account

• Balance sheet

• Directors’ report – subject to exemptions available for ‘small’ companies

• Required Companies Act Disclosures

• Consider FRS 102 requirements and encouragements

• Accounts must present true and fair view

Shareholder financial statements

Consultancy

Primary statements

• Profit and loss

– Companies Act format

– Abridge – 100 % members’ consent

• Balance sheet

– Companies Act format

– Abridge – with consent

Consultancy

Abridged =

Profit and loss

• Combine

– Turnover

– Cost of sales

– Gross profit; and

– Other operating income

• Disclose as gross profit and loss

Balance sheet

• Debtors

– Don’t disclose split between trade debtors and other debtors

• Creditors

– Don’t disclose split between trade creditors, other creditors and bank loans and overdrafts

Consultancy

Companies House accounts

• Primary statements – balance sheet only

– Abridge – with statement of members’ consent

– Adapt

• Plus full notes to the balance sheet

• No need to file profit or loss or directors’ report

• Applies for all accounts

Consultancy

Common issues to date

• The financial statements must state:

– The part of the UK in which the small entity is registered

– The small entity’s registered number

– Whether the small entity is a public or a private company and whether the small entity is limited by shares or by guarantee

– The address of the small entity’s registered office

– Where appropriate, the fact that the entity is being wound up

Consultancy

Common issues to date

• Accounting policies and information about judgements and key sources of estimation uncertainty:

– Update policies

– Boiler plate policies are discouraged

– Only significant policies needed

– Judgements etc. should be specific

• Financial instruments

– Fair value

– Amortised cost

– Cost less impairment

– Non commercial loans

Consultancy

Common issues to date• Operating lease commitments

– Total over the term analysed as expire

• Payments to key management personnel

– May be more than just the directors

– Includes all employee benefits

• Transitional disclosure

– Date

– Impact

• Errors

– PYA where material

– Distinguish between errors and transition adjustments

Consultancy

Common issues to date

• Deferred tax

– Investment property

• Through trading side

• Rate used

– PPE

• Other comprehensive income

• Rate used

– Losses

Consultancy

Common issues to date

• Going concern

• Functional currency

• Operating lease commitments

• Related parties

– Aggregation

– 1A accounts

• Date of transition

Consultancy

Common issues to date

• Revaluations of properties for own use

– Deferred tax to be calculated

– Still maintain a revaluation reserve

– Revaluations when required

– Movements through other comprehensive income

Consultancy

Common issues to date

• Investment properties

– At fair value

– Movements through the trading part of the P&L

– Deferred tax in usual tax charge

– On transition move the revaluation reserve to a fair value reserve

– On subsequent revaluation transfer to fair value reserve through statement of changes in equity

Consultancy

Questions ???

Consultancy

03300 242 333

www.lclifecycle.co.uk