New UK GAAP
Definition
New UK Generally Accepted Accounting Practice (UK GAAP) refers to the updated set of accounting standards for companies in the United Kingdom, adopted from January 1, 2015. These standards aim to bring UK reporting more closely in line with International Financial Reporting Standards (IFRS) while retaining certain elements specific to UK business practices. The new UK GAAP includes FRS 100, FRS 101, FRS 102, and other related standards.
Key Elements:
- 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.
- FRS 103, 104, and 105: Provide additional requirements for insurance contracts, interim financial reporting, and micro-entities, respectively.
Examples
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Small UK Company: A small company with limited resources might adopt FRS 105, which is tailored for micro-entities and provides simplified disclosure and recognition requirements.
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Medium-Sized UK Business: A medium-sized UK business might use FRS 102, which provides a comprehensive yet simplified framework relative to full IFRS, covering areas such as financial instruments, deferred tax, and leases.
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Large UK Entity: A large entity listed on a UK exchange might use FRS 101, which allows for reduced disclosures while still adhering to the recognition and measurement principles of IFRS.
Frequently Asked Questions
What are the primary differences between the old and new UK GAAP?
The new UK GAAP standards, such as FRS 102, introduce a more simplified and streamlined approach, including alignment with IFRS in key areas like financial instruments, recognizing revenue, and accounting for leases.
How do companies choose between different FRS standards?
Companies select the appropriate FRS (Financial Reporting Standard) based on their size, public interest status, and specific reporting needs. For instance, micro-entities may use FRS 105, while larger entities might use FRS 101.
Are there significant changes in recognition and measurement principles?
Yes, new UK GAAP aligns more closely with IFRS in certain areas such as the recognition and measurement of financial instruments, investment property valuation, and deferred income tax.
Does new UK GAAP require more extensive disclosures?
While new UK GAAP aims to provide clarity and simplify reporting, disclosure requirements can still be extensive, particularly for larger or publicly accountable entities. FRS 101 provides relief in terms of reduced disclosures while maintaining IFRS recognition and measurement.
How does new UK GAAP impact small and medium-sized enterprises (SMEs)?
For SMEs, new UK GAAP (particularly FRS 102) simplifies reporting and aligns closer with IFRS, potentially making it easier to understand and apply compared to older, more complex standards.
Related Terms
- IFRS (International Financial Reporting Standards): Global accounting standards set by the International Accounting Standards Board (IASB) aimed at harmonizing accounting across countries.
- FRS (Financial Reporting Standard): Specific standards under UK GAAP detailing recognition, measurement, and disclosure requirements for financial statements.
- FRS 102: The most significant standard under new UK GAAP, akin to a simplified version of IFRS for entities not required to use full IFRS.
Online References
- Financial Reporting Council (FRC): The regulator setting UK accounting standards.
- British Accounting and Finance Association (BAFA): Offers additional resources and guidance on accounting practices in the UK.
- ICAEW: Institute of Chartered Accountants in England and Wales, providing robust materials on UK GAAP.
Suggested Books for Further Studies
- “UK GAAP 2019: Generally Accepted Accounting Practice under UK and Irish GAAP” by Ernst & Young LLP
- “Financial Reporting Standard for Smaller Entities (FRSSE) 2015” by Financial Reporting Council
- “Applying GAAP 2019-20” in conjunction with Deloitte
Accounting Basics: “New UK GAAP” Fundamentals Quiz
Thank you for exploring the essentials of new UK GAAP with this comprehensive guide and interactive quiz! Keep studying and expanding your financial knowledge.
