Accounting Standards

13th July 2016

FRS102: How affects TechCo’s ?
Accounting standard FRS102 is the biggest change in accounting rules for nearly a generation. It will influence how statutory accounts are presented, the terminology and how profit (and hence tax) is calculated. All SME companies must follow this standard for accounting periods commencing on or after 1 January 2016, with earlier adoption encouraged. So how will this affect technology company accounts:

Existing Rules New Rules
Deferred Development Expenditure General criteria for what project costs can be capitalised. Much tighter criteria for what project costs can be capitalised (splitting research and development phases).
Government Capital Grants Amortised over the life of the related assets. Option to recognise fully when eligibility criteria fulfilled.
Freehold Property Option of valuing at depreciated cost or
open market value.
More situations require annual adjustment to open market valuation.
Intangible Assets (including goodwill) Amortised over predicted (but rebuttable) maximum useful economic life of 20 years. Amortised over predicted maximum useful economic life of 5 years.
Holiday Pay No explicit requirement to adjust. Must make a year end accrual or prepayment for any material difference.
Deferred Tax Not required on re-valued property. Must now be provided for upon the gain or loss on re-valued property.
Interest Free Loans Stated at past money value. Discounted back to be stated at net present value of future repayments.

As always, the choice of accounting policy, where there is now a choice, will depend upon whether your business is driven by profitability, tax or solvency.



 
Other items in Blogs
 
Thomas Nicholls
15th June 2021 Tax on Cryptocurrency does not have to be cryptic

Within the last 10 years the cryptocurrency scene has exploded from the first decentralised cryptocurrency, Bitcoin, being created back in 2009 to now more than 4,000 different cryptocurrencies being in existence with a total market cap value of over £1trillion.   This has led to the creation of the Cryptoassets Taskforce which was announced back…

Read More »

Jaimie King
14th June 2021 Deferred tax rate to increase

Deferred tax is a provision on the balance sheet for timing differences in tax and accounting treatment of certain items, and is measured at the rate of tax that the differences are expected to reverse in the future.   In recent years, deferred tax has been measured at the current corporation tax rate of 19%,…

Read More »

Scott Butcher
9th June 2021 Paying VAT by Direct Debit – check your HMRC records

HMRC are in the process of moving VAT records for non-MTD registered traders from their old database to a new one.   Due to banking requirements if HMRC does not hold a valid e-mail address for a trader, when the data is transferred to the new database, any existing direct debit mandate will be cancelled.…

Read More »

James Cater
4th June 2021 Delivering Rural Investment for Vital Employment

  There is a new support programme, DRIVE, that can result in grants of up to 40% of total project costs for businesses in Norfolk and Suffolk that wish to undertake projects that primarily create new employment within the rural economy. Grants can be up to 40% of total project costs with a minimum grant…

Read More »

Steven Denton
3rd June 2021 National Insurance holiday for employers hiring veterans

Following an announcement by the government in 2020, from April 2021 employers hiring former members of the UK armed forces will be exempted from any NI contributions liability on the veteran’s salary up to the Upper Secondary Threshold (UST) in the first twelve months of their employment. However, under current guidelines relief for the 2021-22…

Read More »

Stephen Malkin
28th May 2021 Xero – Multi-factor Authentication

  Do you use Xero?   If you do, then multi-factor authentication when logging in will become compulsory after 2 July 2021.  From 1 June you will be prompted to set this up but can defer up until 2 July 2021.   Having a second layer of security is designed to prevent anyone but you…

Read More »