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Recent developments in UK accounting standards and the implications for…
Recent developments in UK accounting standards and the implications for fund accounting
Fund accountants must prepare financial statements in accordance with a recognised accoutning framework
The framework is usually dependent on where the fund is domiciled and referred as GAAP eg US GAAP, Canadian GAAP, India GAAP, Chinese GAAP, French GAAP
A company can choose not to prepare their financial statements under their local GAAP and instead prepare their financial statements under IFRS
The equivalent to GAAP in the UK is FRS 102 which replaced UK GAAP for all entities with accounting periods on or after 1 Jan 2015 for small to medium sized companies
The introduction of FRS 102 was designed to align accounting principles more closely with IFRS and primarily resulted in changes around
Accoutning treatment of investments in listed shares
Accounting treatment of investments in property
Accounting for goodwill and tangible assets
The recognition of intangible assets required in business combinations
Accoutning for deferred tax
FRS 102 is subject to triennial review by the UK Financial Reporting Council with the most recent review conducted in Dec 2018 with changes published and effective for accounting periods commencing on or after 1 Jan 2019
The focus of the latest review was to address many of the issues that were raised following the implementation of FRS 102 in 2015 and to make FRS 102 clearer and easier to use
Many of the changes were editorial in nature and were mostly to clarify existing provisions rather than make amendments
Investment property in a group
Groups which let property out to other members in that group may account for the property at fair value through the P&L. The change was made to ease the burden and expense of obtaining a fair value of investment properties
Directors loans
A relief was made in 2017 for small companies whose directors that held shares in the company (or family members of the director) provided the company with a loan at below market rates of interest or at zero rates of interest
If the company is no longer considered a small company, it must remeasure the loan liability to present value prospectively from the first reporting date after it ceased to be a small entity
Recongition of intangible assets
Recongition criteria of intangible assets have been changed by introducing three conditions which have to be met.
Companies will be able to recognise fewer intangible assets that are acquired in a business combination separately from goodwill
Financial instruments
Additional information has been included to clarify the definition of basis financial instrument
Financial instruments which contain terms that introduce exposure to unrelated risks or volatility such as commodity prices or changes in equity prices would fall out of the definition of a basic financial insturment
Exemptions for undue cost or effort
Certain concepts relating to the treatment of undue cost or effort in relation to investments in associates, joint ventures and investment properties have been removed to avoid them being used in such a way to avoid measuring certain assets at fair value