The new UK GAAP presents challenges in preparing iXBRL

The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. In 2012 and 2013 the FRC revised financial reporting standards in the UK and Republic of Ireland. The revisions fundamentally reformed financial reporting, replacing almost all extant standards with three Financial Reporting Standards:

• FRS 100 Application of Financial Reporting Requirements
• FRS 101 Reduced Disclosure Framework
• FRS 102 The Financial Reporting Standard Applicable in the UK and Republic of Ireland

The new UK GAAP presents challenges in preparing iXBRL

The Financial Reporting Standard for Smaller Entities (FRSSE) continues to be available for small entities. FRS 102 will be the new standard for UK GAAP reporting entities.
The changes brought about by the consolidation and clarification of FRS will increase consistency, recognise current reporting practice and update the standards to keep pace with emerging business transactions.

FRS 100 Application of Financial Reporting Requirements – According to Graham Holt, Associate Dean and head of accounting at Manchester Metropolitan University Business School, “FRS 100 sets out the overall financial reporting requirements, giving many entities a choice of detailed accounting requirements depending on factors such as size and whether or not they are part of a listed group. FRS 100 provides companies with an opportunity to take advantage of reduced disclosures, and identifies whether entities need to produce their consolidated or individual financial statements in accordance with EU IFRS, FRS 102 or the Financial Reporting Standard for Smaller Entities (FRSSE).” Source: http://www.accaglobal.com/gb/en/member/cpd/reporting/cpd-articles/new-gaap.html

FRS 101 Reduced Disclosure Framework – Disclosure exemptions from EU-adopted IFRS for qualifying entities, was published alongside FRS 100. It applies to the individual accounts of qualifying entities, being entities which are included in publicly available consolidated accounts. The recognition, measurement and disclosure requirements of EU-adopted IFRS are applied, but with a reduction in the required level of disclosure.

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland –

Replaces the majority of UK Financial Reporting Standards and UITF Abstracts. Publish date 14 March 2013. FRS 102 is effective for accounting periods beginning on or after 1 January 2015 with early application permitted for accounting periods ending on or after 31 December 2012 provided that this does not conflict with the requirements of a current SORP or legal requirements for the preparation of financial statements.

Impact on iXBRL Filings

The FRC recognised that the recent changes in financial reporting would need to be accompanied by changes in digital reporting. A project was launched in September 2013 “to improve the quality of electronic tagging of accounts and reflect UK reporting using EU adopted IFRS as well as the new financial reporting standards (FRS 101 and FRS 102) for the UK and Ireland.” https://frc.org.uk/News-and-Events/FRC-Press/Press/2014/May-2014/FRC-consults-on-conventions-for-electronic-tag.aspx

On 8 May the Financial Reporting Council (FRC) released for consultation draft versions of three proposed new XBRL accounts taxonomies to support XBRL reporting under the new UK GAAP standards, FRS 101 Reduced Disclosure Framework and FRS 102 the Financial Reporting Standard applicable in the UK and Republic of Ireland; and under EU-adopted IFRS. Subject to the results of the consultation the FRC is targeting release of the final versions of the taxonomies in September 2014 for implementation from 1 January 2015 to coincide with when the new financial reporting standards become available for use. (https://xbrl.frc.org.uk/)

The draft taxonomies, available at https://uk-taxonomies-tdp.corefiling.com/yeti or downloaded from the FRC website https://xbrl.frc.org.uk/, are available for consultation from now through 08 July 2014. Once comments from the public are considered, the taxonomies are expected to be adopted by HMRC and Companies House. The Irish Revenue Commissioners are also expect to adopt these taxonomies once appropriate Irish extensions are added.

Impact on filers

Accountants and their management teams will face many challenges in 2014 and beyond including standards changes, accounting reporting choices within accounting elections, accounting software changes and more. There is a real danger that some companies might not keep up with the pace of change and the iXBRL implications of all the above. Here are just a few examples of the changes facing financial reporting teams from Graham Holt:

• Although the ASB is pushing ahead with moving UK GAAP onto an IFRS-based framework, it has decided to defer the mandatory effective date of the revised framework to 1 January 2015.
• For each GAAP difference, consideration needs to be given to whether there is an impact on tax payable, which may be subject to transitional rules or specific exemption.
• The IASB’s project on leasing where most leases will appear on the balance sheet could make IFRS less appealing.
• The timetable for the new financial reporting regime is that it should apply to accounting periods commencing on or after 1 January 2015, requiring a transitional balance sheet at 1 January 2014. Companies will be able to early adopt these proposals for periods ending on or after 31 December 2012.
• Potential effective dates of new IFRSs, including revenue recognition, leases and financial instruments projects, which could have resulted in companies making several accounting changes in the short term.

Although usually an afterthought, the iXBRL implications are many. The choice of reporting approach and timing need to be in alignment with the choice of proper taxonomy elements. As timetables move and reporting decisions are made your XBRL financial reporting software needs to be ready to immediately report the changes correctly. Whether your elected accounting changes impact your complexity of reporting or change your key performance indicators, your team needs to be completely aware of the impact. Can your XBRL software perform what if scenarios to help your team decide your optimum reporting strategy?

DTracks Limited is a part of DataTracks Services Limited, leaders worldwide in preparation of financial statements in XBRL and iXBRL formats for filing with regulators. DataTracks prepares more than 12,000 XBRL statements annually for filing with regulators such as SEC in the United States, HMRC in the United Kingdom and MCA in India.

To find out more about DataTracks, visit www.datatracks.co.uk or send an email to enquiry@datatracks.co.uk

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