Interpretation and Application of UK GAAP

For Accounting Periods Commencing On or After 1 January 2015

Steven Collings

• Publisher: Wiley
• Year: 2015
• ISBN:
  9781118819258
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Normas contables

Get up to date on the latest UK GAAP, with practical application guidance

Interpretation and Application of UK GAAP is a comprehensive, practical guide to applying UK GAAP at all levels, for accounting periods commencing on or after January 1, 2015. This book examines all of the core principles for every business, from subsidiaries of major listed companies right down to the very small, owner-managed business. Each chapter includes a list of relevant disclosure requirements to facilitate understanding, and real-world examples bring theory to life to provide guidance toward everyday application. Readers gain practical insight into the preparation of accounts under the EU-adopted IFRS, FRSs 100, 101, and 102, the FRSSE, and the Companies Act 2006, with expert guidance as to which requirements apply in which situations, and to which companies, and the type of disclosure each scenario requires. The book also includes detailed analysis of the planned changes to the Small Companies' Regime which are scheduled to take effect in 2016.

With sweeping changes coming into effect from January 1 st 2015, financial statement preparers must have a sound appreciation of how the new UK GAAP works. This book provides a complete guide, with the latest regulations and straightforward advice on usage.

• Understand UK GAAP application at all levels
• Learn how to handle all relevant key accounting treatments
• Refer to complete disclosure requirement lists for each topic
• Get up to date on the latest area-specific practices

With new accounting practices in many broad areas including investment property, inventory valuations, deferred tax, fixed assets, and more, auditors and accountants need an awareness of how the new financial reporting regime will affect them. Interpretation and Application of UK GAAP is the most comprehensive reference, with the latest information and practical guidance.

Chapter 1
General Requirements of the Companies Act 2006

1. Introduction
2. Accounting Requirements under the Companies Act 2006
3. True and Fair and Adequate Accounting Records
4. International Financial Reporting Standards
5. Generally Accepted Accounting Practice
6. Substance of Transactions
7. Directors' Reports
8. Group Accounts
9. Approval of Financial Statements
10. Interaction of FRS 102 Terminology with Companies Act 2006 Terminology
11. Micro-Entities Legislation

Introduction

In the United Kingdom and Republic of Ireland (RoI), financial statements are prepared using Generally Accepted Accounting Practice (GAAP) and legislation prescribed in the form of the Companies Act 2006. Additional legislation also applies to certain financial statements (for example, the Charities Act) but this publication will only consider the Companies Act 2006 in relation to accounting by companies. At the outset of this chapter it is important to emphasise that the small companies regime in the UK is planned for significant change and these changes are discussed in more detail in Chapter 4. Readers are advised to keep up to date with all developments in this area by regularly reviewing the Department for Business Innovation and Skills' website as well as the Financial Reporting Council's website, as consultation documents were issued in September 2014 outlining proposals to overhaul the small companies regime in the light of the EU Accounting Directive. This chapter examines some of the proposals, with more detail being examined in Chapter 4, but at the time of writing, no final framework had been issued by the Department for Business Innovation and Skills nor the Financial Reporting Council.

Accounting standards are issued and amended by the Financial Reporting Council (FRC). The Regulations consist of the Small Companies and Groups (Accounts and Directors' Report) Regulations 2008 (SI 2008/409) and the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410). The application of accounting standards and the requirements of the Companies Act 2006 have the objective of enabling financial statements to give a true and fair view of the state of a company's financial affairs as at the reporting date, satisfying the directors' duty.

The Consultative Committee of Accountancy Bodies (CCAB) are committed to the promotion and compliance with accounting standards by their members, whether they are auditors or preparers of financial information. The CCAB is made up of:

• The Association of Chartered Certified Accountants (ACCA)
• The Chartered Institute of Public Finance and Accountancy (CIPFA)
• The Institute of Chartered Accountants in England and Wales (ICAEW)
• The Institute of Chartered Accountants in Ireland (ICAI)
• The Institute of Chartered Accountants in Scotland (ICAS)

Whilst the Chartered Institute of Management Accountants (CIMA) is no longer part of the CCAB, it also expects conformance and compliance with accounting standards by its members.

Significant departures from accounting standards and the requirements of the Companies Act 2006 must be adequately disclosed within the financial statements in order that the users can have an understanding of the reasons why the departure is considered to be appropriate. This can arise in certain issues where fair value accounting is concerned. Investment properties, for example, are required to be carried in a company's balance sheet (statement of financial position) at fair value at each reporting date under GAAP. The Companies Act 2006 requires fixed assets to be depreciated on a systematic basis; however, where investment properties are concerned the requirement to depreciate such properties is overridden (known as the ‘true and fair override’) because to carry such properties in the balance sheet at open market value as at the balance sheet date is considered to give more relevant and reliable information. Such a ...