Section 1 – Appendix C to Section 1A – Minimum Disclosure Requirements for Small Entities

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Appendix C to Section 1A

Disclosure requirements for small entities

Extract from FRS102: Section 1AC.1-1AC.2

This appendix sets out the disclosure requirements for small entities based on the requirements of company law. These are shown in italic font in the paragraphs below. Other than substituting company law terminology with the equivalent terminology used in FRS 102 (see Appendix III) the drafting is as close as possible to that set out in company law. References to Schedule 1 are to Schedule 1 of the Small Companies Regulations.

Where there is a similar disclosure requirement in FRS 102 this has been indicated and those paragraphs of FRS 102 that have been cross-referenced are also highlighted by including an * in the left-hand margin. In many cases compliance with the similar requirement of FRS 102 will result in compliance with the requirements below.

1AC.1 As a minimum, where relevant to its transactions, other events and conditions, a small entity shall provide the disclosures set out in this Appendix.

1AC.2 The notes must be presented in the order in which, where relevant, the items to which they relate are presented in the statement of financial position and in the income statement. (Schedule 1, paragraph 42(2))

Paragraphs 8.3 and 8.4 address similar requirements.

Accounting policies

Extract from FRS102: Section 1AC.3-1AC.6

1AC.3 The accounting policies adopted by the small entity in determining the amounts to be included in respect of items shown in the statement of financial position and in determining the profit or loss of the small entity must be stated (including such policies with respect to the depreciation and impairment of assets). (Schedule 1, paragraph 44)

Paragraph 8.5 addresses similar requirements. Including information about the judgements made in applying the small entity’s accounting policies, as set out in paragraph 8.6, may be useful to users of the small entity’s financial statements.

1AC.4 If any amount is included in a small entity’s statement of financial position in respect of development costs, the note on accounting policies must include the following information:

the period over which the amount of those costs originally capitalised is being or is to be written off; and
the reasons for capitalising the development costs in question. (Schedule 1, paragraph 21(2))

Paragraph 18.27(a) addresses similar requirements to paragraph 1AC.4(a).

1AC.5 Where development costs are shown or included as an asset in the small entity’s financial statements and the amount is not treated as a realised loss because there are special circumstances justifying this, a note to the financial statements must state the reasons for showing development costs as an asset and that it is not a realized loss. (Section 844 of the Act)1AC.6 Where in exceptional cases the useful life of intangible assets cannot be reliably estimated, there must be disclosed in a note to the financial statements the period over which those intangible assets are being written off and the reasons for choosing that period. (Schedule 1, paragraph 22(4))

Intangible assets include goodwill. Paragraphs 18.27(a) and 19.25(g) address similar requirements.

OmniPro comment

See illustration of the requirements below:

See extract of examples of accounting policies note below: General information

OmniPro Sample Small Company Limited is primarily engaged in the provision of construction services to both the private and commercial sectors. The company’s’ registered office is Construction Place, Builders Lane, Dunblock, Any City.

The company is a limited liability company incorporated in Any City in the country.

This is the first set of financial statements prepared by OmniPro Sample Small Company Limited in accordance with accounting standards issued by the Financial Reporting Council, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”). The company transitioned from previously extant UK and Irish GAAP to FRS 102 as at 1 January 2014. NOTE THIS IS ONLY INCLUDED IF IT IS THE FIRST YEAR IF NOT THIS DISCLOSURE IS NOT REQUIRED.

The FRC issued amendments to FRS 102 called ‘Amendments to FRS 102-Small entities and other minor adjustments’ which can be applied for accounting periods beginning on or after 1 January 2016 with early adoption permitted. The company has adopted these amendments in these financial statements. (DELETE IF NOT APPLICABLE))

The significant accounting policies adopted by the Company and applied consistently in the preparation of these financial statements are as follows:

i) Basis of preparation

The below paragraph is not required but encouraged under Appendix D (note is required if not prepared on a going concern)

The Financial Statements are prepared on the going concern basis[1], (NOTE CHANGE THIS HERE IF THE BASIS IS NOT GOING CONCERN AND PROVIDE THE BASIS FOR WHY THEY HAVE NOT BEEN PREPARED ON A GOING CONCERN), under the historical cost convention, [as modified by the revaluation of certain tangible fixed assets] and comply with the financial reporting standards of the Financial Reporting Council including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) [2] as adapted by Section 1A of FRS 102, the Companies Act 2006.

The financial statements are prepared in CU which is the functional currency of the company[3].

ii) Consolidation

DISCLOSURES REQUIRED WHERE CONSOLIDTED FINANCIAL STATEMENTS ARE NOT PREPARED

NOTE: THE BELOW IS TO BE INCLUDED WHERE THE PARENT COMPANY IS EXEMPT FROM CONSOLIDATION DUE TO ITS IMMEDIATE PARENT COMPANY (WHICH IS IN THE EEA) PREPARING CONSOLIDATED FINANCIAL STATEMENTS. (NOT SPECIFICALLY REQUIRED BUT INCLUDED FOR BEST PRACTICE)

Consolidated accounts

The company has not prepared consolidated accounts for the period as, being a wholly owned subsidiary of the ultimate parent company, XXXXXX Limited, it is exempted from doing so under Section 9 of FRS 102 which is accommodated under Section 400 of the Companies Act 2006.

NOTE: THE BELOW IS TO BE INCLUDED WHERE THE PARENT COMPANY IS EXEMPT FROM CONSOLIDATION DUE TO ITS ULTIMATE PARENT COMPANY (WHICH IS IN OR OUTSIDE THE EEA) PREPARING CONSOLIDATED FINANCIAL STATEMENTS. (NOT SPECIFICALLY REQUIRED BUT INCLUDED FOR BEST PRACTICE)

Consolidated accounts

NOTE: THE BELOW IS TO BE INCLUDED WHERE THE PARENT COMPANY IS EXEMPT FROM CONSOLIDATION DUE TO THE GROUP BEING CONSIDERED A SMALL COMPANY UNDER COMPANY LAW. (NOT SPECIFICALLY REQUIRED BUT INCLUDED FOR BEST PRACTICE)

Consolidation

The company and its subsidiaries combined meet the size exemption criteria for a group and the company is therefore exempt from the requirement to prepare consolidated financial statements by virtue of Section 479 of the Companies Act 2006. Consequently, these financial statements deal with the results of the company as a single entity.

NOTE: BASIS OF CONSOLIDATION DISCLOSURES REQUIRED WHERE CONSOLIDATED FINANCIAL STATEMENTS ARE PREPARED.

Basis of consolidation (if applicable)

The Group financial statements reflect the consolidation of the results, assets and liabilities of the parent undertaking, the Company and all of its subsidiaries, together with the Group’s share of profits/losses of associates and joint ventures. Where a subsidiary, associate or joint venture is acquired or disposed of during the financial year, the Group financial statements include the attributable results from, or to, the effective date when control passes, or, in the case of associates, when significant influence is lost.

Subsidiary undertakings

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are capitalised with the cost of the investment. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of identifiable net assets acquired is recorded as goodwill. If this is less than the fairvalue of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised as negative goodwill on the balance sheet and amortised through the profit and loss account in the period in which the non-monetary assets are recovered.

Associates and joint ventures

Associates are those entities in which the Group has significant influence over, but not control of, the financial and operating policies. Joint ventures are those entities over which the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic, financial and operating decisions. Investments in associates and joint ventures are accounted for using the equity method of accounting.

Under the equity method of accounting, the Group’s share of the post-acquisition profits or losses of its associates and joint ventures is recognised in the income statement. The income statement reflects, in profit before tax, the Group’s share of profit after tax of its associates and joint ventures in accordance with Section 14 of FRS102, ‘Investments in Associates’ and Section 15 of FRS 102, ‘Interests in Joint Ventures’. The Group’s interest in their net assets is included as investments in associates and joint ventures in the Group Statement of Financial Position at an amount representing the Group’s share of the fair value of the identifiable net assets at acquisition plus the Group’s share of post acquisition retained income and expenses. The Group’s investment in associates and joint ventures includes goodwill on acquisition. The amounts included in the financial statements in respect of the post acquisition income and expenses of associates and joint ventures are taken from their latest financial statements prepared up to their respective year ends together with management accounts for the intervening periods to the Group’s year end (if applicable). The fair value of any investment retained in a former subsidiary is regarded as a cost on initial recognition of an investment in an associate or joint venture. Where necessary, the accounting policies of associates and joint ventures have been changed to ensure consistency with the policies adopted by the Group.

Transactions eliminated on consolidation

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra- group transactions, are eliminated in preparing the Group financial statements. Unrealised gains and income and expenses arising from transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that they do not provide evidence of impairment.

Business combinations and goodwill

All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries, associates and joint ventures. In respect of acquisitions that have occurred since XXXXX (INSERT DATE OF TRANSITION WHERE SECTION 35.10(A) EXEMPTION IS CLAIMED), goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. In respect of acquisitions prior to this date, goodwill is included on the basis of its deemed cost, i.e. original cost less accumulated amortisation from the date of acquisition up to XXXXX, which represents the amount recorded under UK and Irish GAAP. Goodwill is now stated at cost or deemed cost less any accumulated amortisation and impairment losses. In respect of associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment.

iii) Goodwill

Positive goodwill acquired on each business combination is capitalised, classified as an asset on the balance sheet and amortised on a straight line basis over its useful life of 10 years. Goodwill acquired in a business combination is, from the date of acquisition, allocated to each cash generating unit that is expected to benefit from the synergies of the combination. If an investment is disposed of any unamortised goodwill is subsumed within goodwill in the profit and loss on sale on discontinuance. Useful life is determined by reference to the period over which the values of the underlying businesses are expected to exceed the values of their identifiable net assets.

Goodwill is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.

Negative goodwill represents the fair value of net assets on acquisition in excess of the fair value of consideration. Negative goodwill is capitalised and amortised through the profit and loss account in the period in which the non-monetary assets are recovered. In the case of fixed assets acquired, this is the period over which they are depreciated and in the case of stocks it is the period over which they are sold or otherwise realised.

iv) Impairment

The carrying amounts of the Group’s/Company’s assets, other than inventories (which are carried at the lower of cost and net realisable value), deferred tax assets (which are recognised based on recoverability), investment properties (which are carried at fair value), and those financial instruments, which are carried at fair value, are reviewed to determine whether there is an indication of impairment when an event or transaction indicates that there may be. If any such indication exists, an impairment test is carried out and the asset is written down to its recoverable amount.

The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Value in use is defined as the present value of the future pre-tax and interest cash flows obtainable as a result of the asset’s continued use. The pre-tax and interest cash flows are discounted using a pre-tax discount rate that represents the current market risk free rate and the risks inherent in the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. An impairment loss is recognised in the profit and loss account, unless the asset has been revalued when the amount is recognised in other comprehensive income to the extent of any previously recognised revaluation. Thereafter any excess is recognised in profit or loss.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis.

An impairment loss, other than in the case of goodwill, is reversed if there has been a change in the estimates used to determine the recoverable amount. If an impairment loss is subsequently reversed, the carrying amount of the asset (or asset’s cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the revised carrying amount does not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior periods. A reversal of an impairment loss is recognised in the profit and loss account.

v) Intangible assets

Intangible assets acquired as part of a business combination are initially recognised at fair value being their deemed cost as at the date of acquisition. These generally include brand and customer related intangible assets. Computer software that is not an integral part of an item of computer hardware is also classified as an intangible asset. Where intangible assets are separately acquired, they are capitalised at cost. Cost comprises purchase price and other directly attributable costs.

Intangible assets with finite lives are amortised over the period of their expected useful lives in equal annual instalments, as follows;

Brands 5 to 10 years
Customer related	5 to 20 years
Supplier agreements	4 to 10 years
Computer related	3 to 7 years

Subsequent to initial recognition, intangible assets are stated at cost less accumulated amortisation and impairment losses incurred.

vi) Contingent acquisition consideration

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with Section 21. Any adjustments to the estimated contingent consideration are accounted for as an adjustment to goodwill as a current period adjustment as it reflects a change in estimate and the adjusted goodwill is amortised from that date. Contingent consideration that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity. To the extent that contingent acquisition consideration is payable after more than one year from the date of acquisition, it is discounted at an appropriate loan interest rate and, accordingly, carried at net present value on the Balance Sheet. An appropriate interest charge, at a constant rate on the carrying amount adjusted to reflect market conditions, is reflected in the Profit and Loss over the earnout period, increasing the carrying amount so that the obligation will reflect its settlement at the time of maturity.

vii) Financial assets

Financial assets in subsidiaries and other financial fixed assets are stated at cost less provision for any diminution in value.

AND/OR

The company has adopted a policy of measuring investments in financial assets which can be reliably measured at their fair value, with changes in the fair value recognised in the profit and loss.

AND/OR

Financial assets which can be reliably measured are measured at their fair value, with changes in the fair value recognised in other comprehensive income and the revaluation reserve.

viii) General turnover accounting policy notes

(viii) (a) Turnover

Turnover represents net sales to customers and excludes trade discounts and Value Added Tax.

Turnover from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on dispatch of the goods. Turnover from the provision of services is recognised in the accounting period in which the services are rendered and the outcome of the contract can be estimated reliably. The company uses the percentage of completion method based on the actual service performed as a percentage of the total services to be provided.

Revenue in relation to maintenance and support is recognised on a straight line basis over the term of the contract with any unearned revenue included in deferred revenue.

(viii) (b) Turnover accounting policy for an insurance broker Turnover – commission income

Turnover represents commissions earned in the period together with overrider and profit commissions receivable. Commission income is recognised in the accounting period in which the policy commences. To the extent that future services need to be provided over the life of the policy which straddles an accounting period, revenue is deferred. Commission income in relation to claims handling is recognised in the accounting period in which the claims are settled. Overrider and profit commissions, if any, are recognised in line with the underlying agreements and amounts confirmed by product providers.

(viii) (c) Turnover accounting policy for a manufacturng company that produces, install and also engage in long term contracts using the stage of completion using the contract activity

Turnover

Turnover, excluding value added tax, represents the income received and receivable from third parties, in the ordinary course of business, for goods and services provided. Any discounts given to customers are deducted from turnover.

Revenue from the sale of products is recognised when the goods are dispatched to the customer. Revenue from the servicing of machines is recognised over the period of the performance of the service. Proceeds received in advance of product dispatch or performance of service are recorded as deferred revenue in the balance sheet.

Revenue from the sale of machines and manufactured steel components is recognised over the period of the design, build and installation contract. Where the outcome of a long-term contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by surveys of work performed to date. Variations in contract work are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

When the outcome of a long-term contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred and that it is probable it will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

(viii) (d) Turnover accounting policy note where turnover is derived from investments Turnover

Turnover represents dividends and other income received on investments held, net of irrecoverable withholding taxes. Dividends are recognised in the period to which the dividends relate.

(viii) (e) Turnover accounting policy for a software company Turnover

Turnover, which excludes value added tax, represents the invoiced value of goods and services supplied and the value of long term contract work done, as outlined below.

The company usually sells its software as part of an overall solution offered to a customer, in which significant customisation and modification to the company’s software generally is required. As a result, revenue generally is recognised over the course of these long term projects.

Initial license fee for software revenue is recognised as work is performed, under the percentage of completion method of accounting. Subsequent license fee revenue is recognised upon completion of the specified conditions in each contract. Service revenue that involves significant ongoing obligations, including fees for customisation, implementation and modification, is recognised as work is performed, under the percentage of completion method of accounting.

Software revenue that does not require significant customisation and modification, is recognised upon delivery and installation. In managed service contracts, revenue from operation and maintenance of customers’ billing systems is recognised in the period in which the bills are produced. Revenue from ongoing support is recognised as work is performed. Revenue from third–party hardware and software sales is recognised upon delivery and installation, and recorded at gross or net amount according to whether the company acts as a Principal or as an Agent. Maintenance revenue is recognised ratably over the term of the maintenance agreement, which in most cases is one year or less. Losses are recognised on contracts in the period in which the liability is identified.

(viii) (f) Turnover accounting policy for a construction company

Turnover – contracting work

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date. This is normally measured by reference to the proportion of costs incurred up to the date of the balance sheet to the estimated total costs. Variations in contract work, claims and incentive payments are included to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred and that it is probable it will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

(ix) Government grants Example using an accruals model

Government grants are recognised at their fair value when it is reasonable to expect that the grants will be received and all related conditions will be met.

Grants that relate to specific capital expenditure are treated as deferred income which is then credited to the profit and loss account over the related asset’s useful (i.e. an accruals basis). Revenue grants are credited to the profit and loss account when receivable so as to match them with the expenditure to which they relate. Government grants received are included in ‘other income’ in profit or loss

Example using the performance model

Government grants are recognised when it is reasonable to expect that the grants will be received and all related conditions will be met.

Grants that relate to specific capital expenditure are treated as deferred income which is then credited to the profit and loss account once the performance conditions of the grant have been met. Revenue grants are credited to the profit and loss account when the performance conditions for the grant are fulfilled.

(x) Dividend income

Dividend income from subsidiaries is recognised when the Company’s right to receive payment has been established.

(xi) Dividend distribution

Dividend distribution to the company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the company’s shareholders.

(xii) Currency

a) Functional and presentation currency

Items included in the financial statements of the company are measured using the currency of the primary economic environment in which the company operates (“the functional currency”). The financial statements are presented in stg/euro, which is the company’s functional and presentation currency and is denoted by the symbol “CU”. OR The company has chosen to present the financial statement in a currency that differs from its functional currency so that it can be easily consolidated into the parent company’s financial statements.

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the profit and loss account within ‘finance (expense)/income’. All other foreign exchange gains and losses are presented in the profit and loss account within ‘Other operating (losses)/gains’.

(xiii) Financial instruments

The company has adopted Section 11 and Section 12 of FRS 102 when accounting for financial instruments.

a) Trade and other

Trade and other debtors (including amounts owed to group companies if applicable) are recognised initially at transaction price (including transaction costs) unless a financing arrangement in exists in which case they are measured at the present value of future receipts discounted at a market rate. Subsequently these are measured at amortised cost less any provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. All movements in the level of the provision required are recognised in the profit and loss.

b) Cash and cash

Cash and cash equivalents include cash on hand, demand deposits and other short- term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

c) Other financial

Other financial assets include investment which are not investments in subsidiaries, associates or joint ventures. Investments are initially measured at fair value which usually equates to the transaction price and subsequently at fair value where investments are listed on an active market or where non listed investments can be reliably measured. Movements in fair value is measured in the profit and loss.

Where fair value cannot be measured reliably or can no longer be measured reliably, investments are measured at cost less impairment.

The entity has taken advantage of the exemption contained in Section 35.10(u) not to comply with the fair value measurement requirements of Section 11-Basic Finance Instruments and Section 12-Other Financial Instruments Issues on the date of transition to FRS 102 of 1 January 2014 or in the comparative financial period presented. Instead the entity has continued to apply the accounting policy requirements for these financial instruments under old UK GAAP. A transition adjustment has been posted to equity on 1 January 2015 so as to comply with the requirements of Section 11 and Section 12 for the current financial year as required by Section 35.10(u). As a result of availing of this exemption, listed investment have been carried at cost less impairment in the comparative financial period presented and any forward exchange contracts are disclosed as required under old UK GAAP accounting rules. (IF APPLICABLE)

d) Trade and other

Trade and other creditors are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors, other creditors and amounts due to group companies are recognised initially at the transaction price net of transaction costs and subsequently measured at amortised cost using the effective interest method. Where a financing arrangement exists they are initially measured at the present value of future payments discounted at a reduced rate.

The entity has elected to adopt the exemption contained in Section 35.10(v) and to apply the rules detailed in Section 11 to debt instruments with related parties where a financing arrangement existed on the 1 January 2015 as opposed to the date of transition on 1 January 2014. As a result, a transition adjustment was posted to recognise the loans due to/from related parties at the present value of the minimum future payments and amortised cost utilising the prevailing market rate on the 1 January 2015 as permitted by Section 35.10(v)(c). For the comparative year presented these balances are carried at the amount recognised under old UK GAAP that being the amounts received/advanced less repayments. (IF APPLICABLE)

e) Borrowings

Borrowings are recognised initially at the transaction price (present value of cash payable to the bank, including transaction costs). Borrowings are subsequently stated at amortised cost.

Interest expense is recognised on the basis of the effective interest method and is included in finance costs. OR

Borrowing costs – capitalisation rate

The company has adopted a policy of capitalising qualifying borrowing costs. The company capitalises general borrowing costs which are directly attributable to the acquisition of the qualifying asset. The capitalisation rate used is a weighted average of the rates applicable to the company’s general borrowings that are outstanding during the period. Given that weighted averages are utilised this results in a level of estimation. In determining the capitalisation rate the company excludes any specific borrowings related to obtaining non-qualifying assets.

Preference shares, which are mandatorily redeemable on a specific date, are classified as borrowings. The dividends on these preference shares are recognised in the profit and loss as a finance cost.

Borrowings are classified as current liabilities unless the Company has a right to defer settlement of the liability for at least 12 months after the reporting date.

f) Derecognition

Financial liabilities are derecognised when the liability is extinguished, that being when the contractual obligation is discharged.

g) Offsetting financial instruments.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

h) Compound financial

Compound financial instruments issued by the company comprise of convertible preference shares which can be converted to a set amount of ordinary shares at a future date. The liability component of the compound instrument is initially recognised at the fair value of a similar liability where the conversion to equity option is not available. Subsequently this is measured at amortised cost using the effective interest rate method. The equity component is measured the difference between the fair value of the liability component and the fair value of the instrument as a whole. The equity component is not re-measured. Transaction costs are apportioned to the equity and liability component as a proportion that each type instrument is to the total fair value of the compound instrument.

i) Derivatives

Derivatives are initially recognised at fair value on the date the contract is entered into and subsequently re-measured at their fair value. Changes in the fair value are recognised in the profit and loss within finance costs or finance income as appropriate, unless they are included in a hedging arrangement.

Derivative financial instruments are not basic. Hedge accounting is not applied.

OR WHERE HEDGE ACCOUNTING IS APPLIED

Derivative financial instruments are used to manage the Group’s exposure to foreign currency risk and interest rate risk through the use of forward currency contracts and interest rate swaps. These derivatives are generally designated as cash flow hedges in accordance with Section 12. The Group does not enter into speculative derivative transactions.

j) Hedge accounting

Cash flow hedges

Subject to the satisfaction of certain criteria, relating to the documentation of the risk, objectives and strategy for the hedging transaction and the ongoing measurement of its effectiveness, cash flow hedges are accounted for under hedge accounting rules. In such cases, any unrealised gain or loss arising on the effective portion of the derivative instrument is recognised in the cash flow hedging reserve, a separate component of equity and posted to other comprehensive income. Unrealised gains or losses on any ineffective portion of the derivative are recognised in the income statement. When the hedged transaction occurs the related gains or losses in the hedging reserve are transferred to the Income Statement.

The company engages in hedge accounting for forward contracts in order to manage foreign currency fluctuations as well as interest rate swaps.

Changes in fair values of derivatives designated as cash flow hedges which meet the conditions for hedge accounting are recognised in directly equity through other comprehensive income to the extent that they are effective. Any ineffectiveness is charged to the profit and loss. Any gain or loss recognised in Other Comprehensive Income is transferred from equity to the profit and loss when the hedge relationship ends.

Cash flow hedges are those of highly probable forecasted future income or expenses. In order to qualify for hedge accounting, the Group is required to document the relationship between the item being hedged and the hedging instrument and document the causes of hedge ineffectiveness.

There is no significant difference between the timing of the cash flows and income statement effect of cash flow hedges.

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the profit and loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to the profit and loss.

xiv) Provisions

Provisions are recognised when the company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount of the obligation can be estimated reliably.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as a finance cost.

The extent a legal or constructive obligation exists, the acquisition costs include the present value of estimated costs of dismantling and removing the asset and restoring the site. A change in estimated expenditures for dismantling, removal and restoration is added to/and or deducted from carrying value of the related asset. To the extent the change results in a negative carrying amount, the difference is recognised in the profit and loss. The change in depreciation is recognised prospectively.

OR WHERE REMEDIATION PROVISIONS ARE REQUIRED INCLUDE THE BELOW:

xv) Environmental liabilities

Liabilities for environmental costs are recognised when environmental assessments determine clean-ups are probable and the associated costs can be reasonably estimated. Generally the timing of these provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or on closure of active sites. The amount recognised at the balance sheet date is the latest best estimate of the expenditure required.

Discounted liabilities in respect of environmental liabilities and closures costs have been classified between amounts due within one year and due after one year. Provisions for long term obligations are discounted at a rate of X%.

OR WHERE CLOSURE COSTS INCLUDE THE BELOW

xiv) Closure costs

All costs associated with the decision to cease trading have been recognised in these financial statements. These include a write down of assets, provisions for expected closure costs together with profit and losses expected to be incurred up to date of cessation of trading.

xv) Contingencies

Contingent liabilities, arising as a result of past events, are not recognised when (i) it is not probable that there will be an outflow of resources or that the amount cannot be reliably measured at the reporting date or (ii) when the existence will be confirmed by the occurrence or non- occurrence of uncertain future events not wholly within the company’s control. Contingent liabilities are disclosed in the financial statements unless the probability of an outflow of resources is remote.

Contingent assets are not recognised. Contingent assets are disclosed in the financial statements when an inflow of economic benefits is probable.

xvi) Employee Benefits

The company provides a range of benefits to employees, including annual bonus arrangements, paid holiday arrangements and defined contribution pension plans.

a) Short term benefits

Short term benefits, including holiday pay and other similar non-monetary benefits, are recognised as an expense in the period in which the service is received.

b) Annual bonus plans

The company recognises a provision and an expense for bonuses where the company has a legal or constructive obligation as a result of past events and a reliable estimate can be made.

c) Defined contribution pension plans

The Company operates a defined contribution plan. A defined contribution plan is a pension plan under which the company pays fixed contributions into a separate fund. Under defined contribution plans, the company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

For defined contribution plans, the company pays contributions to privately administered pension plans on a contractual or voluntary basis. The company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

d) Defined benefit pension plan

Defined benefit pension scheme assets are measured at fair value. Defined benefit pension scheme liabilities are measured on an actuarial basis using the projected unit credit method. The excess of scheme liabilities over scheme assets is presented on the balance sheet as an asset or liability. Deferred tax is shown separately within deferred tax. The defined benefit pension charge to operating profit comprises the current service cost, past service costs, introductions, curtailments and settlements. The net interest cost on the scheme liabilities is presented in the profit and loss account as other finance expense. Actuarial gains and losses arising from changes in actuarial assumptions and from experience surpluses and deficits are recognised in other comprehensive income for the year in which they occur together with the return on plan assets, less amounts included in net interest.

xvii) Preference share capital

Redeemable preference shares and the cumulative preference dividend reserve have been classified as liabilities in the balance sheet. The preference dividend is charged in arriving at the interest cost in the profit and loss account. (include the following where applicable) However no dividends will be paid on the cumulative preference shares until the company has positive profit and loss reserves.

xviii) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

xix) Related party transactions

The company discloses transactions with related parties which are not wholly owned with the same group. It does not disclose transactions with members of the same group that are wholly owned.Interest income

Interest income is recognised using the effective interest method.

xx) Taxation

Tax is recognised in the profit and loss account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case tax is also recognised in other comprehensive income or directly in equity respectively.

a) Current tax

Current tax is calculated on the profits of the period. Current tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date.

b) Deferred tax

Deferred tax arises from timing differences that are differences between taxable profits and total comprehensive income as stated in the financial statements. These timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements.

Deferred tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Deferred tax is recognised in the profit and loss account or other comprehensive income depending on where the revaluation was initially posted.

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised.

Current or deferred taxation assets and liabilities are not discounted.

NOTE: INCLUDE THE BELOW IF CONSOLIDATED FINANCIAL STATEMENTS ARE BEING PREPARED

If a temporary difference arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting or taxable profit or loss, no deferred tax is recognised. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

xxi) Tangible fixed assets

a) Cost

Tangible fixed assets are recorded at historical cost or deemed cost (note include valuation here where appropriate), less accumulated depreciation and impairment losses. Cost includes prime cost, overheads and interest incurred in financing the construction of tangible fixed assets. Capitalisation of interest ceases when the asset is brought into use.

Freehold premises are stated at cost (or deemed cost for freehold premises held at valuation at the date of transition to FRS 102 where the optional transition exemption under S.35.10(a) of FRS 102 has been applied) less accumulated depreciation and accumulated impairment losses.

The company previously adopted a policy of revaluing freehold premises and they were stated at their revalued amount less any subsequent depreciation and accumulated impairment losses. The company has adopted the transition exemption under FRS 102 paragraph 35.10(d) and has elected to use the previous revaluation as deemed cost OR The company has adopted the transition exemption under FRS 102 paragraph 35.10(C) and has elected to use the fair value as deemed cost. (THIS PARAGRAPH IS ONLY APPLICABLE FOR THE TRANSITION YEAR)

The difference between depreciation based on the deemed cost charged in the profit and loss account and the asset’s original cost is transferred from the non-distributable reserve to retained earnings through equity.

Equipment and fixtures and fittings are stated at cost less accumulated depreciation and accumulated impairment losses.

Where investment property can no longer be reliably measured without undue cost or effort these assets are reclassified to property, plant and equipment at the carrying amount prior to the transfer and depreciated over the useful economic lives.

Spare parts that are acquired as part of an equipment purchase which are only to be used in connection with these specific assets are initially capitalised and amortised as part of the equipment. Spare parts which are expected to be used during more than one period are capitalised as property, plant and equipment.

NOTE: Policy to be included where a policy of revaluation has been chosen:

The company has adopted a policy of revaluing freehold premises. Freehold premises are included in the balance sheet at their fair value on the basis of a periodic professional valuation less accumulated depreciation. The difference between depreciation based on the revalued amount is charged in the profit and loss account and the asset’s original cost is transferred from revaluation reserve to retained earnings. Annually the carrying values are reviewed for appropriateness by the directors. Any changes in the value of freehold properties are reflected as a movement on the revaluation reserve except where the revaluation is below original cost in which case the balance is recognised in the profit and loss account.

To the extent a legal or constructive obligation exists, the acquisition costs include the present value of estimated costs of dismantling and removing the asset and restoring the site. A change in estimated expenditures for dismantling, removal and restoration is added to/and or deducted from carrying value of the related asset. To the extent the change results in a negative carrying amount, the difference is recognised in the profit and loss. The change in depreciation is recognised prospectively.

b) Depreciation

Depreciation is provided on tangible fixed assets, on a straight-line basis, so as to write off their cost less residual amounts over their useful lives.

The estimated useful lives assigned to property, plant and equipment are as follows:

Freehold Premises	2% straight line on cost
Motor vehicles	25% straight line on cost
Office equipment, fixtures & fittings	12½% straight line on cost
Computer equipment	25%/33⅓% straight line on cost
Service equipment and spare parts	10% straight line on cost

The company’s policy is to review the remaining useful lives and residual values of property, plant and equipment on an on-going basis and where indicators exist adjust the depreciation charge to reflect the remaining estimated life and residual value.

Fully depreciated property, plant & equipment are retained in the cost of property, plant & equipment and related accumulated depreciation until they are removed from service. In the case of disposals, assets and related depreciation are removed from the financial statements and the net amount, less proceeds from disposal, is charged or credited to the income statement.

[1] CA does not require disclosure however Appendix D of Section 1A of FRS 102 encourages an entity to disclose the fact that the financial statements have been prepared on the going concern basis. As this is encouraged we have included it in these financial statements. Where the entity has made a decision to wind up the entity that is required to be disclosed, there is no choice.

[2] Appendix 1AD.1 of FRS 102 encourages a statement of compliance to be included in the notes to the financial statements in order to show a true and fair view also.

Where the entity has made a decision to wind up the entity that is required to be disclosed, there is no choice.

Where there is uncertainties about going concern CA 2006 requires this to be disclosed. Appendix D of Section 1A of FRS 102 also encourages this in order to show a true and fair view.

[3] Not required by the CA or FRS 102 for small companies however it would be considered good practice.

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xxii) Stocks

Stocks comprise consumable items and goods held for resale. Inventories are stated at the lower of cost and net realisable value. Cost is calculated on a first in, first out basis and includes invoice price, import duties and transportation costs. Net realisable value comprises the actual or estimated selling price less all further costs to completion or to be incurred in marketing, selling and distribution.

At the end of each reporting period inventories are assessed for impairment. If an item of stock is impaired, the identified inventory is reduced to its selling price less costs to complete and sell and an impairment charge is recognised in the profit and loss account. Where a reversal of the impairment is recognised the impairment charge is reversed, up to the original impairment loss, and is recognised as a credit in the profit and loss account.

xxiii ) Investment properties

The group/company owns a number of freehold office buildings that are held to earn long term rental income and for capital appreciation (adjust as necessary). Investment properties are initially recognised at cost. Investment properties whose fair value can be measured reliably without undue cost or effort are measured at fair value. Changes in fair value are recognised in the profit and loss account.

(xxiv) Leases

a) Finance leases

Leases in which substantially all the risks and rewards of ownership are transferred by the lessor are classified as finance leases.

Property, plant and equipment acquired under finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments and are depreciated over the shorter of the lease term and their useful lives. The capital element of the lease obligation is recorded as a liability and the interest element of the finance lease rentals is charged to the profit and loss account on an annuity basis.

Each lease payment is apportioned between the liability and finance charges using the effective interest method.

b) Operating leases

Leases in which substantially all the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

c) Lease incentives

Incentives received to enter into a finance lease reduce the fair value of the asset and are included in the calculation of present value of future minimum lease payments.

Incentives received to enter into an operating lease are credited to the profit and loss account, to reduce the lease expense, on a straight-line basis over the period of the lease.

NOTE: EXTRACT FOR A LEASING COMPANY

Gross earnings

Gross earnings comprises the finance charge element of lease rentals, the profit or loss generated on the termination of lease agreements and administration fees pertaining to lease agreements. Gross earnings are stated net of trade rebates and trade discounts, and exclusive of value added tax.

Finance lease and hire purchase agreements

Finance charges are allocated to periods so as to give a constant rate of return on the net cash investment in the lease. The total net investment included in the balance sheet represents total lease payments receivable, net of finance charges relating to future periods. Bad debts are charged to the profit and loss account in the period in which they occur. Recoveries of bad debts previously charged to the profit and loss account are credited to the profit and loss account upon recovery of the bad debt. The net investment in finance lease and hire purchase agreements is stated net of a bad and doubtful debt provision.

(xxv) Intangible assets

Intangible assets acquired separately from a business are capitalised at cost. Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill if the fair value can be measured reliably on initial recognition. Intangibles assets as part of an acquisition are not recognised where they arise from legal or other contractual rights, and where there is no history of exchange transactions. Intangible assets excluding development costs, created within the business are not capitalised and instead expenditure is charged against profit in the year.

Subsequent to initial recognition, intangible assets are stated at cost less accumulated amortisation and impairments.

Intangible assets are amortised on a straight line basis over their estimate useful lives is included within administration expenses in the profit and loss. The useful economic life is determined to be the life over which economic benefits are utilised. The carrying value of intangible assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. The useful economic lives of intangible assets are as follows:

Development Costs		5 Years Straight Line
Patents		10 Years Straight Line
Customer Lists		7 Years Straight Line

The company’s policy is to review the remaining economic lives and residual values of intangible assets on an on-going basis and to adjust the amortisation charge to reflect the remaining estimated life where applicable and residual value where indicators of a change are present.

xxvi) Goodwill

Intangible assets comprises purchased goodwill which represents the excess of the fair value of consideration paid for the acquisition of a XXXX business, over the fair value of identifiable assets acquired. Goodwill is amortised to the profit and loss account on a straight line basis over its useful economic life. The estimated useful economic lives of goodwill is up to XX years. Useful life is determined by reference to the period over which the values of the underlying business are expected to exceed the value of their identifiable net assets.

Goodwill is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable.

xxvii) Exceptional items

Exceptional items are those that the Directors’ view are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Company’s’ financial performance. The Company believe that this presentation provides a more informative analysis as it highlights one off items. Such items may include significant restructuring costs. The Group/Company has adopted an income statement format that seeks to highlight significant items within the Group/Company results for the year.

OR THE BELOW CAN BE USED

The Group has adopted an income statement format that seeks to highlight significant items within the Group results for the year. Such items may include restructuring, impairment of assets, profit or loss on disposal or termination of operations, litigation settlements, legislative changes and profit or loss on disposal of investments. Judgement is used by the Group in assessing the particular items, which by virtue of their scale and nature, should be disclosed in the income statement and notes as exceptional items.

xxviii) Share based costs

The company participates in a number of equity-settled, share based compensation plans operated by its parent company, XXXXX Limited. The fair value of the employee services received in exchange for the grant of the options or shares is recognised as an expense. The parent undertaking does not immediately recharge the company for these expenses so they are shown as a capital contribution from the parent undertaking within other reserves. Where any subsequent recharge is not, in the opinion of the directors, clearly linked to the share based payment charge, the amount is treated in a manner similar to a management recharge.

The total amount to be expensed over the vesting period is determined by reference to the fair value of the options, shares or Restricted Stock Units (RSU’s) granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options or shares that are expected to vest. At each balance sheet date, the entity revised its estimates of the number of options of shares that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

Fair value of options is measured using the Black Scholes model.

xxix) Investment properties

The group owns a number of freehold office buildings that are held to earn long term rental income and for capital appreciation. Investment properties are initially recognised at cost. Investment properties whose fair value can be measured reliably are measured at fair value. Changes in fair value are recognised in the profit and loss account.

For investment properties which cannot be reliably measured without undue cost or effort these are included within property, plant and equipment and depreciated.

Biological assets (where fair value is used)

The acquisition of land for forest projects is originally recorded at cost in accordance with Section 17 of FRS 102. Biological assets are stated at fair value, less estimated point of sale costs at each period end. The fair value is determined using the present value of expected net cash flows from the asset, discounted at a current market rate other than for young seedling stands. The fair value of the young seedling stands is the actual reforestation cost of those stands.

The gain or loss in fair value of these biological assets is reported in net profit. The measurement of biological growth in the field is an important element of this valuation. Initially at the start of the plantation cycle the fair value is equal to the standard costs of preparing and maintaining a plantation, including the appropriate cost of capital, assuming efficient operations. Towards the end of the plantation cycle the fair value depends solely on the discounted value of the expected harvest, less estimated point of sale costs. The calculation takes into account the growth potential, environmental restrictions and other reservations of the forests. Felling revenues and maintenance costs are calculated on the basis of actual costs and prices, taking into account the company’s projection of future price development.

Periodic changes resulting from growth, felling, prices, discount rate, costs and other premise changes are included in operating profit in the profit and loss account.

Biological assets – Livestock (where fair value model is adopted)

Livestock are measured at their fair value less costs to sell. The fair value of livestock is determined based on market prices of livestock of similar age, breed, and genetic merit. Changes in the fair value are recognised within cost of sales in the profit and loss.

Biological assets – Forestry (where cost model is adopted)

The acquisition of land for forest projects is originally recorded at cost in accordance with Section 17 of FRS 102. Biological assets are measured at the lower of cost and estimated selling price less costs to complete and sell.

Depletion represents the costs of forests clearfelled during the year, calculated as the proportion that the area harvested bears to the total area of similar forests. The depletion amount is charged to the profit and loss account and is based on cost.

Biological assets – Livestock (where cost model is adopted)

Livestock are measured at the lower of cost and net realisable value. The purchase price of livestock bought in is measured at the purchase price plus directly attributable purchase costs. Own reared stock is measured at cost based on the selling price of the livestock less an appropriate margin based on industry norms to bring the value back to the estimated cost price

Changes in presentation and accounting policies and corrections of prior period errors

Extract from FRS102: Section 1AC.7-1AC.9

1AC.7 Where there is a change in the presentation of a small entity’s statement of financial position or income statement, particulars of any such change must be given in a note to the financial statements in which the new presentation is first used, and the reasons for the change must be explained. (Schedule 1, paragraph 2(2))

Paragraphs 3.12 and 3.13 address similar requirements.

1AC.8 Where the corresponding amount for the immediately preceding financial year is not comparable with the amount to be shown for the item in question in respect of the reporting period, and the corresponding amount is adjusted, the particulars of the non- comparability and of any adjustment must be disclosed in a note to the financial statements. (Schedule 1, paragraph 7(2))

This is likely to be relevant where there has either been a change in accounting policy or the correction of a material prior period error. Paragraphs 10.13, 10.14 and 10.23 address similar requirements.

1AC.9 Where any amount relating to a preceding reporting period is included in any item in the income statement, the effect must be stated. (Schedule 1, paragraph 61(1))

OmniPro comment

Prior year adjustments have been discussed in detail in Section 10. Refer to section 10 for further details. The example below illustrates the requirements and assumes the statement of income and retained earnings is included as it would be required to show a true and fair view.

Example 3: Prior period error

During the 31 December 2015 year end, Company A noticed that the prior year financial statements omitted stock of CU100,000 which was material to the financial statements. Stock in the same location was also omitted at year ended 31 December 2013. The inventory in this location at that time was CU95,000. Given the materiality, this error requires a prior year adjustment. Assume a corporation tax rate of 10%. The adjustments required to correct this error are:

In the 31 December 2014 accounts to restate the opening balance

	CU	CU
Dr Inventory	95,000
Cr Profit and Loss Reserves (CU95,000-CU9,500 of current tax)		85,500
Cr Corporation Tax Liability (CU95,000*10%)		9,500

Being journal to reflect adjustment in respect of prior years’ including the additional tax payable

	CU	CU
Dr Inventory	5,000
Cr Cost of Sales		5,000
Dr Current Income Tax in P&L	500
(CU5,000*10%)
Cr Corporation Tax Liability		500

Being journal to reflect movement on stock incorrectly excluded from 2013 to 2014 and the related corporation tax payable as a result

See below an example of how this should be disclosed so as to meet the disclosure requirements.

Profit and Loss Account	2015	2014
	CU	Restated CU
Turnover	1,600,000	1,500,000
Cost of sales	(1,220,000)	(1,100,000)
Operating profit	380,000	400,000
Interest receivable	5,000	5,000
Interest payable	(1,000)	(10,000)
Profit before taxation	384,000	395,000
Tax on profit on ordinary activities	(38,400)	(39,500)
Profit for the financial year	345,600	355,500
Balance Sheet	2015	2014 Restated
	CU	CU
Fixed assets
Tangible assets	190,000	150,000
Current assets
Inventory	400,000	300,000
Cash at bank and in hand	360,000	150,000
	760,000	450,000
Creditors – amounts falling due within one year	(99,700)	(95,300)
Net current assets	660,300	354,700
Total assets less current liabilities	850,300	504,700
Capital and reserves
Called up share capital	100	100
Profit and loss account	850,200	504,600
Shareholders’ funds	850,300	504,700

Prior year adjustment

Prior year adjustment – material error

The prior year adjustment is due to the omission of inventory located in an outside warehouse being excluded from the inventory at 31 December 2014 and 31 December 2013. The value of the inventory at 31 December 2014 was CU100,000 and the value of the inventory at 31 December 2013 was CU95,000. The financial statements for 2014 has been restated to correct this error.

The prior year adjustment resulted in an increase to the inventory balance at 31 December 2013 and 2014 of CU95,000 and CU100,000 respectively. This has resulted in the cost of sales for 31 December 2014 year end decreasing by CU5,000 and the profit and loss reserves increasing by CU85,500 being the net of tax adjustment and the tax charge for 2014 increasing by CU500. The effect of the restatement on each financial statement line item affected is shown below.

Analysis of prior year adjustments	2014 CU
Cost of sales for year ended 31 December 2014
Cost of sales as previously stated	1,005,000
Adjustment for inventory previously excluded	(5,000)
Cost of sales as restated	1,100,000
Inventory for year ended 31 December 2014
Inventory at 31 December 2014 as previously stated	200,000
Adjustment for inventory previously excluded	100,000
Inventory as restated	300,000
Income tax expense for year ended 31 December 2014
Income tax expense as previously stated	39,000
Tax effect on adjustment for inventory previously excluded	500
Income tax expense as restated	(39,500)
Income tax payable
Income tax payable at 31 December 2014 as previously stated	(39,000)
Tax effect on adjustment for inventory previously excluded	(9,500)
Tax effect on adjustment for inventory previously excluded	(500)
Income tax payable as restated	(49,000)
Profit and loss reserves at 31 December 2014
Profit and loss reserves at 31 December 2014 as previously stated	414,600
Adjustment for inventory previously excluded net of tax at 31	85,500
December 2013. Adjustment for movement of inventory previously excluded net of tax	4,500
in the 31 December 2014 year
Profit and loss reserves at 31 December 2014 as restated	504,600
Profit and loss reserves at 1 January 2014
Profit and loss reserves at 1 January 2014 as previously stated	63,600
Adjustment for inventory previously excluded net of tax	85,500
Profit and loss reserves at 1 January 2014 as restated	149,100

Profit for the year after taxation for year ended 31 December 2014

Profit after tax for year ended 31 December 2014 as previously stated	351,000
Movement on inventory previously excluded net of tax	4,500
Profit after tax for year ended 31 December 2014 as restated	355,500
Profit for the year after taxation for year ended 31 December 2013 Profit after tax for year ended 31 December 2013 as previously stated	63,600
Inventory previously excluded net of tax	85,500
Profit after tax for year ended 31 December 2013 as restated	149,100

Note the lines ‘Prior year adjustment – change in accounting policy (see note X)’ is just included for illustrative purposes

	Called up Share Capital	Profit and loss Account	Total Equity
	CU	CU	CU
Balance at 1 January 2014 as previously reported	100	63,600	63,600
Prior year adjustment – change in accounting policy (see note X) Prior year adjustment – correct material error (see note X)	–	– 85,500	– 85,500
Balance at 1 January 2014 as restated	100	149,100	149,100
Profit for the year as previously reported		351,000	351,000
Prior year adjustment – change in accounting policy (see note X) Prior year adjustment – correction of material error (see note X)	–	– 4,500	– 4,500
Profit for the year as restated (see note X)	–	355,500	351,000
Balance at 31 December 2014	100	504,600	504,700
Balance at 1 January 2015	100	504,600	504,700
Profit for the year		345,600	345,600
Balance at 31 December 2015	100	850,200	850,300

Note the inventory comparative figures would also be update and the word ‘Restated’ would be included under the comparative year as was done for the profit and loss and balance sheet above.

Note the above illustrates a statement of changes in equity however a movement in income statements and retained earnings could also be shown with the same layout as above

True and fair override

Extract from FRS102: Section 1AC.10

1AC.10 If it appears to the small entity that there are special reasons for departing from any of the principles set out in company law in preparing the small entity’s financial statements in respect of any reporting period, it may do so, in which case particulars of the departure, the reasons for it, and its effects must be given in the notes to the financial statements. (Schedule 1, paragraph 10(2))A

NOTE: THIS IS ONLY EXPECTED TO OCCUR IN SPECIAL CIRCUMSTANCES. PARAGRAPHS 3.4 AND 3.5 ADDRESS SIMILAR REQUIREMENTS.

OmniPro comment

It will be very rare where such an override will be required. Notes supporting the statement of financial position

Extract from FRS102: Section 1AC.11-1AC.19

1AC.11 Where an asset or liability relates to more than one item in the statement of financial position, the relationship of such asset or liability to the relevant items must be disclosed either under those items or in the notes to the financial statements. (Schedule 1, paragraph 9A)

(i) Fixed assets

1AC.12 In respect of each item which is shown under the general item ‘fixed assets’ in the small entity’s statement of financial position the following information must be given:

a) the aggregate amounts (on the basis of cost or revaluation) in respect of that item as at the date of the beginning of the reporting period and as at the reporting date respectively;

b) the effect on any amount shown in the statement of financial position in respect of that item of:

i) any revision of the amount in respect of any assets included under that item made during the reporting period as a result of revaluation;

ii) acquisitions during the reporting period of any assets;

iii) disposals during the reporting period of any assets; and

iv) any transfers of assets of the small entity to and from that item during the reporting period. (Schedule 1, paragraphs 48(1) and 48(2))

1AC.13 In respect of each item within paragraph 1AC.12 there must also be stated:

a) the cumulative amount of provisions for depreciation and impairment of assets included under that item as at the date of the beginning of the reporting period and as at the reporting date respectively;

b) the amount of any such provisions made in respect of the reporting period;

c) the amount of any adjustments made in respect of any such provisions during the reporting period in consequence of the disposal of any assets; and

d) the amount of any other adjustments made in respect of any such provisions during the reporting (Schedule 1, paragraph 48(3))

These two paragraphs apply to all fixed assets, including investment property, property, plant and equipment, intangible assets (including goodwill), fixed asset investments, biological assets and heritage assets recognised in the statement of financial position.

Each item refers to a class of fixed assets shown separately either in the statement of financial position, or in the notes to the financial statements.

These reconciliations need not be presented for prior periods.

Paragraph 16.10(e) addresses similar requirements for investment property.Paragraphs 17.31(d) and (e) address similar requirements for property, plant and equipment. Paragraphs 18.27(c) and (e) address similar requirements for intangible assets other than goodwill. Paragraph 19.26 addresses similar requirements for goodwill. Paragraphs 34.7(c) and 34.10(e) address similar requirements for biological assets. Paragraphs 34.55(e) and (f) address similar requirements for heritage assets recognised in the statement of financial

Fixed assets measured at revalued amounts

1AC.14 When fixed assets are measured at revalued amounts the items affected and the basis of valuation adopted in determining the amounts of the assets in question in the case of each such item must be disclosed in the note on accounting policies. (Schedule 1, paragraph 34(2))

These requirements apply when:

investments in subsidiaries, associates and joint ventures are measured at fair value with changes in fair value recognised in other comprehensive income. Paragraph 9.27(b) addresses a similar disclosure requirement;

property, plant and equipment are revalued using the revaluation model set out in paragraphs 17.15B to 17.15F. Paragraph 17.31(a) addresses a similar disclosure requirement; and

intangible assets other than goodwill are revalued using the revaluation model set out in paragraphs 18.18B to 18H.

These requirements do not apply to investment property and biological assets measured at fair value through profit or loss.

1AC.15 Where any fixed assets of the small entity (other than listed investments) are included under any item shown in the small entity’s statement of financial position at a revalued amount, the following information must be given:

the years (so far as they are known to the directors) in which the assets were severally valued and the several values;

in the case of assets that have been valued during the reporting period, the names of the persons who valued them or particulars of their qualifications for doing so and (whichever is stated) the bases of valuation used by them. (Schedule 1, paragraph 49)

Paragraphs 17.32A(a) and (c), 18.29A(a) and (c) and 34.55(e)(ii) address similar requirements. These paragraphs do not require the names or qualifications of the persons who valued the fixed assets to be disclosed; paragraphs 17.32A(b) and 18.29A(b) address only whether or not the valuer was independent.

These requirements apply in the same circumstances as those set out in paragraph 1AC.14.

1AC.16 In the case of each item in the statement of financial position measured at a revalued amount, the comparable amounts determined according to the historical cost accounting rules must be shown in a note to the financial statements. (Schedule 1, paragraph 34(3))

The comparable amounts refers to the aggregate amount of cost and the aggregate of accumulated depreciation and accumulated impairment losses that would have been required according to the historical cost accounting rules (Schedule 1, paragraph 34(4)).

Paragraphs 17.32A(d) and 18.29A(d) address similar requirements.

These requirements apply in the same circumstances as those set out in paragraph 1AC.14.

1AC.17 Where fixed assets are measured at revalued amounts the following information must be given in tabular form:

movements in the revaluation reserve in the reporting period, with an explanation of the tax treatment of items therein; and
the carrying amount in the statement of financial position that would have been recognised had the fixed assets not been revalued. (Schedule 1, paragraph 54(2))

Paragraphs 6.3A, 17.32A(d), 18.29A(d) and 29.27(a) address similar requirements.

These requirements apply in the same circumstances as those set out in paragraph 1AC.14.

1AC.18 The treatment for taxation purposes of amounts credited or debited to the revaluation reserve must be disclosed in a note to the financial statements. (Schedule 1, paragraph 35(6))

Paragraph 29.27(a) addresses similar requirements.

These requirements apply in the same circumstances as those set out in paragraph 1AC.14.

(ii) Capitalisation of borrowing costs

1AC.19 When a small entity adopts a policy of capitalising borrowing costs, the inclusion of interest in determining the cost of the asset and the amount of the interest so included is disclosed in a note to the financial statements. (Schedule 1, paragraph 27(3))

Paragraph 25.3A(a) addresses a similar requirement to the second part of this.

OmniPro comment

See illustration of the above requirements below. The section makes it clear that disclosures are not required for the prior year:

Extract from the notes to the financial statements – property, plant and equipment note

Property, plant and equipment

	Freehold Premises	Motor Vehicles	Plant and machinery	Computer Equipment	Total
	CU	CU	CU	CU	CU
Costs
At beginning of year	207,473	150,038	488,979	144,523	891,013
Additions in year	1,295,000	165,000	91,733	34,704	1,586,437
Revaluation	500,000	–	–	–	500,000
Transfer from investment Property	100,000	–	–	–	100,000
Disposals in year	–	(93,359)	–	–	(93,359)
At end of year	1,502,473	221,679	580,712	179,227	2,984,091

Depreciation At beginning of year	187,723	111,836	270,802	134,767	705,128
Charge for Year	37,543	26,799	29,015	56,642	149,999
Revaluation	(125,000)	–	–	–	(125,000)
On disposals	–	(42,060)	–	–	(42,060)
Impairment	–	–	100,000	–	100,000
At end of year	100,266	96,575	399,817	191,409	788,067
Net book value
At 31 December 2015	1,752,207	125,104	80,895	(12,182)	2,196,024
At 31 December 2014	19,750	38,202	18,177	9,756	85,885

The following assets were held under finance lease:

2015

2014

Net Book Value

66,884

129,389

Depreciation Charge for the Year

29,015

31,317

a) The land and buildings which are used as part of the company’s core business were revalued by [state name], [state qualification] to an open market value basis reflecting existing use [or state alternate basis if appropriate if this Is higher] on [state date] 20XX. The valuation was carried out in accordance with the SCS Appraisal and Valuation Manual. {If the valuer is an officer or employee of the company or a group company this fact must be stated}.

These valuations have been incorporated into the financial statements and the resulting revaluation adjustments have been taken to the revaluation reserve. The revaluations during the year ended 31 December 2015 resulted in a revaluation surplus of CU375,000.

b) The historical cost of the freehold premises is as follows:

	2015	2014
	CU	CU
Original cost	XXX	XXX
Accumulated depreciation	(XXX)	(XXX)
Net book amount	XXX	XXX

c) As a result of falling profits and in accordance with Section 27 of FRS 102, the carrying values of the plant and machinery assets in the widget segment have been compared to their recoverable amounts. As a result of this exercise an impairment charge of CU100,000 was recognised in the financial statements. The value in use has been derived from the future cash flow projections using a pre-tax discount rate of X%. Cash flows have been projected over the next five years based on management’s business plan, and thereafter a steady growth rate of 1% has been applied which is consistent with the company’s growth rate over the past number of years.

d) The freehold property has been pledged as security on loans taken out by the company.

e) The company capitalised CUXXX (2014: CUXXXX) in borrowing costs during the year. The capitalisation rate used was X% (2014: X%).

Include the below if the option is capitalise borrowing costs is chosen (not applicable here included for illustrative purposes only).

f) The company capitalised CUXXX (2014: CUXXXX) in borrowing costs during the The capitalisation rate used was X% (2014: X%).

Extract from notes to the financial statements (assuming revaluation upwards of CU375,000 and there was an active market available to value the asset)

2. Intangible assets

The patents have been pledged as security on loans taken out by the company. There were no capital commitments at the year end.

The customer lists are valued based on market value at 31 December 2015 as determined from an active market in which they are traded. The remaining useful life on the customer lists is 3 years

The historical cost of the customer list is as follows:

		CU
At 31 December 2015		20,020
At 31 December 2014		24,165

As a result of falling profits and in accordance with Section 27 of FRS 102, the carrying values of the patent assets have been compared to their recoverable amounts. As a result of this exercise an impairment charge of CU100,000 was recognised in the financial statements. The value in use has been derived from the future cash flow projections using a pre-tax discount rate of X%. Cash flows have been projected over the next five years based on management’s business plan, and thereafter a steady growth rate of 1% has been applied which is consistent with the company’s growth rate over the past number of years.

Extract from the notes to the financial statements – note where a joint venture, subsidiary or associate is fair valued through OCI and the others are stated at cost

Financial assets	Subsidiary Undertakings	Joint Venture and associates	Other investments
	CU	CU	CU	Total
Cost
At 1 January 2015	XXX	XXX	XXX	XXX
Additions	XXX	XXX	XXX	XXX
Fair value adjustments	XXX	–	XXX
Disposals	–	(XXX)	–	(XXX)
At 31 December 2015	XXX	XXX	XXX	XXX
Amounts provided:
At 1 January 2015	XXX	–	XXX	XXX
Additional provision	XXX	–	–	XX
At 31 December 2015	XXX	XXX	XXX	XXX
Carrying amount At 31 December 2015	XXXX	XXXX	XXXX	XXXX
At 31 December 2014	XXXX	XXXX	XXXX	XXXX

(i) Investment in Subsidiary undertakings are stated at cost less impairment. Other investments are held at cost less impairment. Investments in joint ventures are measured at fair value based on valuation models which make the most of external market data such that the fair value represents the estimated value that could be obtained in an arm’s length transaction under normal business conditions. The discounted cash flows use a discount rate of 10%. The valuation used a multiple of earnings which is consistent with industry norms

Investment in Subsidiary undertakings are stated at cost less impairment. Other investments are measured at fair value based on the quoted share prices. Other investments are held at cost less impairment. The fair value of the associate interest cannot be determined as there is no published price quotations.

	Revaluation reserve
Reserves (Note the above could be covered by showing a statement of changes in equity and an OCI)
	CU
At January 1 2015	XXXX
Revaluation of property, plant and equipment net of deferred tax of X%	XXXX
Revaluation of subsidiaries, associates etc net of deferred tax of X%	XXXX
Revaluation of intangibles net of deferred tax of X%	XXXX
At 31 December 2015	XXXX

EXTRACT FROM THE INVESTMENT PROPERTIES NOTE INVESTMENT PROPERTIES

The land and buildings of the company were valued by [state name], [state qualification] to open market value reflecting existing use [or state alternate basis if appropriate] on [state date] 20XX. The valuation was carried out in accordance with the SCS Appraisal and Valuation Manual. {If the valuer is an officer or employee of the company or a group company this fact must be stated}. The critical assumptions made relating to the valuations are set out below:

	2015	2014
Yields	4%	4%
Inflation rate	2%	2%

The historical cost of the investment property is as follows:

At 31 December 2015 CU850,725

At 31 December 2014 CU3,315,201

EXTRACT ALTERNATIVE LAYOUT FOR THE INVESTMENTS NOTE
INVESTMENTS
	2015	2014
	CU	CU
Shares in subsidiary undertakings	254	254
Other investments	185,386	208,946
	185,640	209,200
Other Investments
	2015	2014
Cost	CU	CU
At the beginning of the year	208,946	208,946
Purchased during the year	150,000	–
Movement in fair value recognised in the profit and loss (for illustrative purposes only)	–	–
Disposed of during the year	(173,560)	–
At the end of the year	185,386	208,946

The company purchased CU150,000 of government bonds during the year. This represents the fair value at 31 December 2015 (2014: CUnil). These mature on 1 January 2020.

The other investment relates to an investment made by the company in an unlisted entity where less than a significant influence is held. The fair value of this investment cannot be reliably measured in line with the hierarchy in Section 11 of FRS 102, as a result it is held at cost. The cost of the investment at the year ended 31 December 2015 was CU185,336 (2014: CU208,946).

The directors are satisfied that no impairment is required.

Illustration of other disclosures required by Schedule 1 of SI 980/2015 where the abridged balance sheet is not applied (where the abridged balance sheet is adopted the debtors and creditors note is not required unless it is required to show a true and fair value)

DEBTORS1/2

Trade debtors	2015 CU 429,718	2014 CU 84,759
Other debtors3	18,500	22,500
Prepayments	39,576	42,573
	487,794	149,832

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR4/5	2015	2014
	CU	CU
Trade creditors	278,229	265,873
Directors Loans (note x)	50,000	50,000
Corporation tax due6	8,250	7,300
Other taxation and social security7	51,016	49,116
Other creditors and accruals8	11,356	48,003
	398,851	420,292
Amounts owed to directors are unsecured, interest free and repayable on demand.

DETAILS OF BORROWINGS9/10/11/12	Within 1 year	Between 1 & 2 years	Between 2 & 5 years	After 5 years	Total
Repayable other than by	£	£	£	£	£
installments Bank Overdrafts	–	–	–	–	–
Repayable by instalments Term Loan	–	–	–	–	–
Finance lease obligations	–	–	–	–	–
Hire purchase obligations	–	–	–	–	–
	–	–	–	–	–

The bank facilities13 are secured by a debenture incorporating fixed and floating charges over the assets of the company and personal guarantees from the Directors.

The facilities expiring within one year are annual facilities subject to review at various dates during 2015/2016.

SHARE CAPITAL14

2015

2014

Allotted, called up and fully paid share capital

100,000 ordinary shares of CU1 each

100,000

[/et_pb_text][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]

Impairment of assets

Extract from FRS102: Section 1AC.20-1AC.21

1AC.20 Provisions for impairment of fixed assets (including fixed asset investments) must be disclosed separately in a note to the financial statements if not shown separately in the income statement. (Schedule 1, paragraph 19(3))

Paragraph 27.32(a) addresses similar requirements.

1AC.21 Any provisions for impairment of fixed assets that are reversed because the reasons for which they were made have ceased to apply must be disclosed (either separately or in aggregate) in a note to the financial statements if not shown separately in the income statement. (Schedule 1, paragraph 20(2))

Paragraph 27.32(b) addresses similar requirements.

OmniPro comment

See below illustration of the above requirements:

Extract from the notes to the financial statements

Operating profit

Operating profit is stated after charging/(crediting):

Note 1: The directors have reviewed the carrying value of tangible fixed assets, net of associated deferred grants, at the year end in accordance with Section 27 “Impairment of Assets”. As a result of this exercise performed, a reversal of a previous impairment loss of CU8,000 (2014: CUNil) has been credited to the profit and loss account for the year. The reversal of the impairment of CU8,000 represents a reversal of an impairment of tangible fixed assets net of a release of related deferred grants of CU500. The reversal of the impairment loss previously recognised has been allocated to fixed assets categories on a pro-rata basis relative to their post-impairment carrying values at the date of the reversal. The amount of impairment reversed was limited to the amount the fixed assets would have been carried at if no impairment had previously been booked.

The company’s activities were considered, due to their nature, to form one income-generating unit for the purposes of the impairment review. A pre-tax discount rate of 6%, representing the estimated market rate of return on an investment with equal risk, was applied to the expected future cash flows in the value in use calculation. Value in use was considered to exceed estimated net realisable value. Cash flows have been projected over five years based on management forecasts and budgets. After that a steady growth rate of 1% has been assumed. The reversal of the impairment arose due to the fact that the market in which the company operates has significantly improved and the previous estimates included in the initial impairment review were too pessimistic.

Fair value measurement

Extract from FRS102: Section 1AC.22-Section 1AC.25

1AC.22 Where financial instruments or other assets have been measured at fair value through profit or loss there must be stated:

the significant assumptions underlying the valuation models and techniques used to determine the fair values;
or each category of financial instrument or other asset, the fair value of the assets in that category and the change in value:

included directly in the income statement; or
credited to or (as the case may be) debited from the fair value reserve, in respect of those assets. (Schedule 1, paragraphs 51(2)(a) and (b))

This does not apply where financial instruments or other assets are measured at fair value only on initial recognition.

This applies where financial instruments, certain inventories, investment property and biological assets are subsequently measured at fair value through profit or loss, which is permitted or required by paragraphs 9.26(c), 11.14(b), 11.14(d)(i), 12.8, 13.4A, 14.4(d), 15.9(d), 16.7 and 34.4.

Paragraphs 11.41(a), 11.41(d), 11.43, 11.48(a)(i), 11.48(a)(ii), 12.28, 12.29(c), and 12.29(e) address similar disclosure requirements for financial instruments. Paragraphs 16.10(a) and 16.10(e)(ii) address similar disclosure requirements for investment property. Paragraphs 34.7(b) and 34.7(c)(i) address similar disclosure requirements for biological assets.

Financial instruments measured at fair value

1AC.26 Financial instruments which under international accounting standards may be included in accounts at fair value, may be so included, provided that the disclosures required by such accounting standards are made. (Schedule 1, paragraph 36(4))

This only applies in certain circumstances; for example, it does not apply to derivatives. It applies where investments in subsidiaries, associates and joint ventures are measured at fair value through profit or loss. When it applies, the disclosures required by Section 11 that relate to financial assets and financial liabilities measured at fair value, including paragraph 11.48A, shall be given.

1AC.23 Where financial instruments or other assets have been measured at fair value through profit or loss there must be stated for each class of derivatives, the extent and nature of the instruments, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows. (Schedule 1, paragraph 51(2)(c))

1AC.24 Where any amount is transferred to or from the fair value reserve during the reporting period, there must be stated in tabular form:

the amount of the reserve as at the beginning of the reporting period and as at the reporting date respectively; and
the amount transferred to or from the reserve during that year. (Schedule 1, paragraph 51(3))

Paragraphs 6.3A, 12.29(c) and 12.29(d) address similar requirements.

1AC.25 The treatment for taxation purposes of amounts credited or debited to the fair value reserve must be disclosed in a note to the financial statements. (Schedule 1, paragraph 41(2))

Paragraph 29.27(a) addresses similar requirements.

OmniPro comment

See illustration of the above points for investment properties, subsidiary, associate, joint venture which are measured at fair value through the profit and loss account.

Extract from the notes to the financial statements – note on investment property

During the year the company completed the construction of a number of units which are now rented to third parties. As a result these units were transferred at cost from work in progress to investment
The land and buildings of the company were valued by [state name], [state qualification] to open market value reflecting existing use [or state alternate basis if appropriate] on [state date] 20XX. The valuation was carried out in accordance with the SCS Appraisal and Valuation Manual. {If the valuer is an officer or employee of the company or a group company this fact must be stated}. The critical assumptions made relating to the valuations are set out below:

	2015	2014
Yields	X%	X%
Inflation rate	X%	X%

OR WHERE APPLICABLE WHERE NO VALUATION WAS COMPLETED AT THE YEAR END

The land and buildings of the company were valued by [state name], [state qualification] to fair value reflecting existing use [or state alternate basis if appropriate] on [state date] 20XX. The valuation was carried out in accordance with the SCS Appraisal and Valuation Manual. {If the valuer is an officer or employee of the company or a group company this fact must be stated}. An updated valuation was not performed by the company as the directors believe the valuation performed in XXX is not materially different from the carrying valye at 31 December 2015.

iii. At 31 December 2015, the company could no longer reliably estimate the fair value of the investment property held at XXX due to market conditions in that location. As a result, in accordance with Section 16 of FRS 102, the property has been transferred from investment property and reclassified to property, plant and equipment at the carrying amount of CU50,000 and is depreciated from that date.

At 31 December 2015, the company could no longer estimate the fair value of the investment property without undue cost and effort, therefore, the property has been transferred from investment property and reclassified to property, plant and equipment at the carrying amount of CU50,000 and is depreciated from that date.

iv. At 31 December 2015, a property which met the definition of investment property but which could not be classified as investment property due the inability to reliably measure its fair value due to market conditions can now be reliably measured. As a result, in accordance with Section 16 of FRS 102, the property has been transferred from property, plant and equipment and reclassified to investment property at its fair value at that date with the uplift recognised in the profit and

At 31 December 2015, a property which met the definition of investment property but which could not be classified as investment property due the inability to reliably measure its fair value without undue cost or effort can now be reliably measured. As a result, in accordance with Section 16 of FRS 102, the property has been transferred from property, plant and equipment and reclassified to investment property at its fair value at that date with the uplift recognised in the profit and loss.

v. All investment property has been pledged as security on loans taken out by the company.

Extract from the notes to the financial statements – note where a joint venture, subsidiary or associate is fair valued through the profit and loss

Financial assets	Subsidiary Undertakings		Joint Venture and associates		Other investments		Total
	CU		CU		CU		CU
Cost
At 1 January 2015	XXX		XXX		XXX		XXX
Additions	XXX		XXX		XXX		XXX
Fair value adjustments	XXX		–		XXX
Disposals	–		(XXX)		–		(XXX)
At 31 December 2015	XXX		XXX		XXX		XXX
Amounts provided:
At 1 January 2015	XXX		–		XXX		XXX
Additional provision	XXX		–		–		XX
At 31 December 2015	XXX		XXX		XXX		XXX
Carrying amount At 31 December 2015		XXXX		XXXX		XXXX	XXXX
At 31 December 2014		XXXX		XXXX		XXXX	XXXX

a) Investment in Subsidiary undertakings are stated at cost less impairment. Other investments are held at cost less

Investments in joint ventures are measured at fair value based on valuation models which make the most of external market data such that the fair value represents the estimated value that could be obtained in an arm’s length transaction under normal business conditions. The discounted cash flows use a discount rate of 10%. The valuation used a multiple of earnings which is consistent with industry norms.

Extract of notes to the financial statements – Financial instruments note disclosures

	2015	2014
	CU	CU
Financial assets at fair value through profit or loss Listed investments	2,000	3,000
Financial liabilities at fair value through profit and loss Derivative financial instruments – Forward foreign contracts (see note 1)	3,000	2,000

Note 1: The company takes out foreign currency contracts to hedge against the risk of foreign exchange movements. At 31 December 2015, the company had forward contracts to purchase FC100,000 at a rate of CU1=FC.80p. These contracts expire within 6 months of the year end. The fair value of these instruments at 31 December 2015 was CU10,000 (2014: CU2,000). This has been recognised in the profit and loss.

The forward contracts are measured at fair value by utilising observable market date, more specifically quoted prices.

OR WHERE HEDGING IS APPLIED

Derivatives – forward foreign exchange contracts

Forward foreign exchange contracts are marked to market using quoted forward exchange rates at the reporting date.

The absolute principal amount of the outstanding forward foreign exchange contracts at 31 December 2015 was CUXXXX (2014: CUXXXXXXX).

The hedged highly probable forecast transactions denominated in foreign currency are expected to occur at various dates during the next 12 months. Gains and losses recognised in the hedging reserve in equity (note XX) on forward foreign exchange contracts as of 31 December 2015 are recognised in the profit and loss in the period or periods during which the hedged transaction affects the income statement. This is generally within 12 months of the end of the reporting period.

Derivatives – Interest Rate Swaps

The fair value of interest rate swaps is calculated as the present value of the expected future cash flows based on observable yield curves.

The notional principal amounts of the outstanding interest rate swap contracts at 31 December 2015 were CUxxxxx (2014: CUxxxxxx).

At 31 December 2015, the average fixed interest rate on the swap portfolio was X% (2014: X%). The main floating rates are EURIBOR and LIBOR. Gains and losses recognised in the hedging reserve in equity (note XX) on interest rate swap contracts as of December 2015 will be continually released to the income statement within finance cost until the maturity of the relevant interest rate swap.

Note 2: At the year end the fair value of certain equity investments could not be determined. As a result the carrying value prior to this date has now been deemed to be the cost of the investments.

Extract of notes to the financial statements Note: Interest receivable and similar income

Included within Interest receivable and similar income (or other operating income) are the below financial instruments held at fair value in the profit and loss account:

	2015	2014
	CU	CU
Fair value gain on movement on fair value of investment properties	XXX	XXX
Movement on fair value of listed investments	XXX	XXX
Gain on derivative financial instruments	2,000	2,000
	XXX	XXX

(Note this discloure could be included in operating profit note also)

Note: Interest payable and similar expenses

Included within interest payable and similar expenses are the below financial instruments measured at fair value through the profit and loss account:

	2015	2014
	CU	CU
Loss on movement on fair value of investment properties	XXX	XXX
Movement on fair value of listed investments	XXX	XXX
Loss on derivative financial instruments	2,000	2,000
	XXX	XXX

(Note this disclosure above could be included in operating profit note also)

Extract from the operating profit note: OPERATING PROFIT
Operating profit is stated after charging:
	2015	2014
	CU	CU
Depreciation	149,999	170,037
Directors’ remuneration	212,000	225,600
Movement of biological assets measured at fair value	XXX	XXX
(Gain)/loss on fair value of investment properties (see note X)	XXX	XXX

Auditors’ remuneration for the audit of financial statements (specifically required under the act)

XXX

Extract from other comprehensive income showing activity on cash flow hedges:

Statement of Comprehensive Income Profit for the financial year		1,000,000	500,000
Exchange differences on retranslation of foreign operations		XXX	XXX
Cash flow hedges
– effective portion of changes in fair value to cash flow hedges		XXX	XXX
– fair value of cash flow hedges transferred to income statement		XXX	XXX
Actuarial loss in respect of the defined pension scheme		(XXX)	(XXX)
Gain/(loss) on revaluation of intangible assets		XXX	(XXX)
Gain/(loss) on revaluation of property, plant and equipment		XXX	(XXX)
Gain/(loss) on revaluation of subsidiaries, associates, etc.		XXX	(XXX)
Deferred tax on components of other comprehensive income		XXX	XXX
Total other comprehensive income for the year net of tax	200,000		(100,000)
Total comprehensive income for the year	1,200,000		400,000

Cash flow hedge reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred since XXXXX.

Indebtedness, guarantees and financial commitments

Extract from FRS102: Section 1AC.27-1AC.31

1AC.27 For the aggregate of all items shown under ‘creditors’ in the small entity’s statement of financial position there must be stated the aggregate of the following amounts:

a) the amount of any debts included under ‘creditors’ which are payable or repayable otherwise than by instalments and fall due for payment or repayment after the end of the period of five years beginning with the day next following the reporting date; and

b) in the case of any debts so included which are payable or repayable by instalments, the amount of any instalments which fall due for payment after the end of that period. (Schedule 1, paragraph 55(1))

1AC.28 In respect of each item shown under ‘creditors’ in the small entity’s statement of financial position there must be stated the aggregate amount of any debts included under that item in respect of which any security has been given by the small entity with an indication of the nature and form of any such security. (Schedule 1, paragraph 55(2))

Paragraphs 11.46, 13.22(e), 16.10(c), 17.32(a) and 18.28(c) address similar requirements.

1AC.29 The total amount of any financial commitments, guarantees and contingencies that are not included in the balance sheet must be stated. (Schedule 1, paragraph 57(1)).

The total amount of any commitments concerning pensions must be separately disclosed. (Schedule 1, paragraph 57(3)).

The total amount of any commitments which are undertaken on behalf of or for the benefit of:

a) any parent, fellow subsidiary or any subsidiary of the small entity; or

b) any undertaking in which the small entity has a participating interest, must be separately stated and those within (a) must also be stated separately from those within (b). (Schedule 1, paragraph 57(4))

Such commitments can arise in a variety of situations, including in relation to group entities, investments, property, plant and equipment, leases and pension obligations. Paragraphs 15.19(d), 16.10(d), 17.32(b), 18.28(d), 20.16, 21.15, 28.40A(a), 28.40A(b), 28.41A(d),

33.9(b)(ii) and 34.62 address similar requirements.

1AC.30 An indication of the nature and form of any valuable security given by the small entity in respect of commitments, guarantees and contingencies within paragraph 1AC.29 must be given. (Schedule 1, paragraph 57(2))

Paragraphs 11.46, 13.22(e), 16.10(c), 17.32(a) and 18.28(c) address similar requirements.

1AC.31 If in any reporting period a small entity is or has been party to arrangements that are not reflected in its statement of financial position and at the reporting date the risks or benefits arising from those arrangements are material the nature and business purpose of the arrangements must be given in the notes to the financial statements to the extent necessary for enabling the financial position of the small entity to be assessed. (Section 410A of the Act)

Examples of off-balance sheet arrangements include risk and benefit-sharing arrangements or obligations arising from a contract such as debt factoring, combined sale and repurchase arrangements, consignment stock arrangements, take or pay arrangements, securitisation arranged through separate entities, pledged assets, operating lease arrangements, outsourcing and the like. In many cases the disclosures about financial commitments and contingencies required by paragraphs 1AC.29 and 1AC.30 will also address such arrangements.

OmniPro comment

Examples of the above disclosures have been included in the related party section below as well as any restrictions placed on assets. See further examples below:

1) Extract from contingencies note:

Contingencies

A legal action is pending against the company for alleged unfair dismissal. The directors under advisement from their legal team expect that the claim will be successfully defended. Should the company be unsuccessful in the action the maximum estimated settlement is not expected to exceed CU10,000. It is not practicable as yet to state the timing of the any possible payment.

A legal case has been taken against the company, the outcome of which is uncertain. There is a contingent liability in the range of CU0 to CU400,000 in respect of this case. It is not practicable as yet to state the timing of the any possible payment.

A customer has commenced a legal action against the company for defective workmanship. The directors under advisement by their legal team believe that it is possible but not probable the action will succeed and therefore no provision has been made in these financial statements. Should the action succeed the estimated liability would be CU100,000.

There is a potential contingent asset/liability in the future in relation to profit commission agreements entered into with various product producers. However in the opinion of the directors it is not practicable to provide an estimate of the financial effect of this contingent asset/liability as it is based on future loss ratios in relation to unsettled claims.

It is not anticipated that any material liabilities will arise from the contingent liabilities other than those provided for.

Off-balance sheet arrangements

The company entered into a guarantee with XYZ Bank on behalf of another group company to guarantee the loans in order to allow the subsidiary to expand its operations.

2) Extract from commitments note:

At 31 December 2015, the company had the following commitments under non-cancellable operating leases that expire as follows:

	2015 CU	2014 CU
Within one year	145,000	145,000
Within two to five years	100,000	100,000
Greater than five years	–	–

The company had the following financial commitments at 31 December 201X

Capital commitments for Plant and Machinery CUXXX (2014: CUXXX).
Contractual commitments in respect of supply contracts CUXXX (2014: CUXXX).
The company has finance lease commitments for plant and machinery as disclosed in notes XX of the financial

Extract meeting requirements of IAC.27 above

DETAILS OF BORROWINGS	Within 1 year	Between 1 & 2 years	Between 2 & 5 years	After 5 years	Total
Repayable other than by	£	£	£	£	£
installments Bank Overdrafts	–	–	–	–	–
Repayable by instalments Term Loan	–	–	–	–	–
Finance lease obligations	–	–	–	–	–
Hire purchase obligations	–	–	–	–	–
	–	–	–	–	–

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Notes supporting the income statement

Extract from FRS102: Section 1AC.32-1AC.33

1AC.32 The amount and nature of any individual items of income or expenses of exceptional size or incidence must be stated. (Schedule 1, paragraph 61(2))

Paragraph 5.9A addresses a similar requirement in relation to material items.

1AC.33 The notes to a small entity’s financial statements must disclose the average number of persons employed by the small entity in the reporting period. (Section 411 of the Act).

OmniPro comment

See below an example of the types of disclosures required where the item is deemed so material that it should be shown on the face of the profit and loss.

Profit and Loss Account For the Year Ended 31 December 2015
	Notes	2015	2014
		CU	CU
Turnover		XXXXX	XXXXX
Cost of sales		(XXXX)	(XXXX)
Gross profit		XXXX	XXXX
Selling and distribution costs		(XXX)	(XXX)
Administrative expenses		(XXX)	(XXX)
Other operating income		XXX	XXX
Operating profit	3	900,000	XXX
Operating profit before exceptional item		1,200,000	XXX
Impairment of tangible fixed assets		150,000	XXX
Restructuring provision		150,000	XXX
Operating profit		900,000	XXX
Income from shares in group undertakings		XXX	XXX
Income from shares in other financial assets		XXX	XXX
Income from shares in participating interests		XXX	XXX
Profit before interest and taxation		XXXX	XXXX
Interest receivable and similar income	6	XXX	XXX
Interest payable and similar expenses	7	(XXX)	(XXX)
Profit before taxation		XXXX	XXXX
Tax on profit		(XXX)	(XXX)
Profit for the financial year		1,000,000	500,000
Extract from notes to the financial statements
Exceptional item – impairment charge		2015	2014
		CU	CU
Restructuring costs (see (i) below)		8,000	–
Impairment of tangible fixed assets		8,000	–
Amortisation of deferred grants arising on impairment of related assets		(500) 7,500	– –

i) During the year the company announced a formal plan to restructure the operations and as a result announced a plan to let employees go. This amount represents the expected cost of redundancy as a result of this

ii) The directors have reviewed the carrying value of tangible fixed assets, net of associated deferred grants, at the year end in accordance with Section 27 “Impairment of Assets”. As a result, a net impairment loss of CU8,000 (2014: CUNil) has been charged to the profit and loss account for the year. The impairment of CU8,000 represents an impairment of tangible fixed assets net of a release of related deferred grants of CU500. The impairment losses have been allocated to fixed assets categories on a pro-rata basis relative to their pre-impairment carrying values. The impairment loss arose as a result of the material change in the market in which the company operates. Deferred tax has been recognised as a result of this

The company’s activities were considered, due to their nature, to form one income-generating unit for the purposes of the impairment review. A pre-tax discount rate of X%, representing the estimated market rate of return on an investment with equal risk, was applied to the expected future cash flows in the value in use calculation. Value in use was considered to exceed estimated net realisable value. Cash flows have been projected over five years based on management forecasts and budgets. After that a steady growth rate of X% has been assumed.

NOTE: WHERE EXCEPTIONAL ITEM NOT SHOWN ON THE FACE OF THE PROFIT AND LOSS

Exceptional item

2015

2014

Administrative expenses in the profit and loss account includes the following exceptional charges:

Provision against investment in subsidiary/joint venture/associate

Exceptional item

The exceptional item arose as a result of a settlement reached in respect of litigation initiated against the company upon termination of a licence agreement prior to the year end. This amount which includes provision for all legal and other costs relating to the matter which will be borne by the company is also included within accruals and other liabilities in note XX of the financial statements.

Or Exceptional items	2015	2014
(i) Movement in provision for operating costs to date of closure	CU XX	CU XXX
(ii) Gain on settlement of pension scheme (see (a) below)	XX	(XXX)
Total	XXX	XXX

a) Following the closure of the company, the defined benefit pension scheme was wound up with effect from 31 December XXX. On wind-up, the pension scheme had sufficient assets to meet the liabilities of the scheme. The gain arose on closure of the scheme.

3) Employee numbers disclosure:

The average employee numbers for the year was XX (2015:XX)

Related party disclosures

Extract from FRS102: Section 1AC.34-1AC.36

1AC.34 Where the small entity is a subsidiary, the following information must be given in respect of the parent of the smallest group for which consolidated financial statements are drawn up of which the small entity is a member:

a) the name of the parent which draws up the consolidated financial statements;

b) the address of the parent’s registered office (whether in or outside the UK); or

c) if it is unincorporated, the address of its principal place of business. (Schedule 1, paragraph 65)

Paragraph 33.5 addresses a similar requirement to paragraph (a).

1AC.35 Particulars must be given of material transactions the small entity has entered into that have not been concluded under normal market conditions with:

a) owners holding a participating interest in the small entity;

b) companies in which the small entity itself has a participating interest; and

c) the small entity’s directors [or members of its governing body].

Particulars must include:

a) the amount of such transactions;

b) the nature of the related party relationship; and

c) other information about the transactions necessary for an understanding of the financial position of the small entity. Information about individual transactions may be aggregated according to their nature, except where separate information is necessary for an understanding of the effects of the related party transactions on the financial position of the small entity.

Particulars need not be given of transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly-owned by such a member. (Schedule 1, paragraph 66)

Although disclosure is only required of material transactions with the specified related parties that have not been concluded under normal market conditions, small entities disclosing all transactions with such related parties would still be compliant with company law.

Transactions with directors, or members of an entity’s governing body, include directors’ remuneration and dividends paid to directors.

Paragraphs 33.9 and 33.14 address similar requirements for all related parties.

1AC.36 Details of advances and credits granted by the small entity to its directors and guarantees of any kind entered into by the small entity on behalf of its directors must be shown in the notes to the financial statements.

The details required of an advance or credit are:

a) its amount;

b) an indication of the interest rate;

c) its main conditions;

d) any amounts repaid;

e) any amounts written off; and

f) any amounts waived.

There must also be stated in the notes to the financial statements the totals of amounts stated under (a), (d), (e) and (f).

The details required of a guarantee are:

a) its main terms;

b) the amount of the maximum liability that may be incurred by the small entity; and

c) any amount paid and any liability incurred by the small entity for the purpose of fulfilling the guarantee (including any loss incurred by reason of enforcement of the guarantee).

There must also be stated in the notes to the financial statements the totals of amounts stated under (b) and (c). (Section 413 of the Act)

Paragraph 33.9 addresses similar requirements for all related parties.

A small entity that is not a company shall provide this disclosure in relation to members of its governing body.

OmniPro comment

See illustration of the above points:

Extract from the notes to the financial statements – Related party note:

Related party transactions	Sales to related party	Purchases from related party	Amounts owed from related party	Amounts owed to related party
	CU	CU	CU	CU
*Entities with control (where 100% ownership does not exist), joint control or significant influence over the Company** 2015	–	–	–	–
2014	–	–	–	–
Entities over which the company has control (where 100% ownership does not exist), joint control or significant influence* 2015	–	–	–	–
2014	–	–	–	–

*Note there is only a requirement to disclose transitions which have not been concluded under normal terms here.

Terms and conditions of transactions with related parties

Sales and purchases between related parties are made at normal market terms. Outstanding balances with entities are unsecured, interest free and cash settlement is expected within 30 days of invoice. A provision for bad debt has been created at the year end for CU10,000 (2014: CUnil) against an amount due from an associate company.

Director loan’s

Included within other debtors/creditors are the below balances owed by/to directors:

Directors’ Loans	Directors A	Director B
	CU	CU
Opening Balance	4,332	100,000
Repayments to directors	9,301	–
Advances from directors	(1,000)	–
Closing balance	12,633	100,000

The interest rate applied to this loan was 5% per annum on a compound interest basis and is repayable on demand.

The maximum amount outstanding to directors during the year was CUXX,XXX. There were no amounts written off or waived during the year (2014: CUnil).

Directors remuneration

See below details of the director’s remuneration paid for the year.

Remuneration
	2015	2014
	FC	FC
Salary	182,000	185,600
Pension Benefits	30,000	30,000
	212,000	225,600

The directors received no dividends during the year (2014:CUNil).

Other related party transactions (concluded under non market conditions)

AN Other, the director of the company, holds an interest in patents which are licensed to the company for the manufacture of certain machines. During the period, patent royalties of CUXXXX (2014: CUXXXX) were charged to the company in respect of the use of these patents. At 31 December 2015 an amount of CUXXXX was due from the directors (2014: CUXXXX amount due to the directors).

During the year the company was charged CUXXX (2014: CUXXX) by AN Other Limited for rental of the premises where the company operates. An amount of CUXXX (2014: CUXXX) was owed to AN Other Limited at the year end. AN Other Limited is related by virtue of common directors.

During the year the company paid expenses in the amount of CUXXXX (2014: CUXXXX) on behalf of an associate, Associate Limited. An amount of CUXXXX (2014: CUXXXX) remained outstanding from this company at the year end. A provision of CUXXXXX (2014: CUXXX) was provided against this balance at the 31 December 2015. Associate is related by virtue of common directors.

Guarantees

The company has not provided or benefited from any guarantees for any related party receivables or payables.

Controlling Party

OmniPro plus limited is a whole owned subsidiary of XXX Limited with a registered office at XXX. The consolidated financial statement of XXX Limited can be obtained from the aforementioned address.

Other

Extract from FRS102: Section 1AC.37-1AC.39

1AC.37 The financial statements must state:

a) the part of the UK in which the small entity is registered;

b) the small entity’s registered number;

c) whether the small entity is a public or a private company and whether the small entity is limited by shares or by guarantee;

d) the address of the small entity’s registered office; and

e) where appropriate, the fact that the entity is being wound up. (Section 396 of the Act) Paragraph 3.24(a) addresses similar requirements.

1AC.38 Where items to which Arabic numbers are given in any of the formats have been combined, unless they are not material, the individual amounts of any items which have been combined must be disclosed in a note to the financial statements. (Schedule 1, paragraph 4(3))

1AC.39 The nature and financial effect of material events arising after the reporting date which are not reflected in the income statement or statement of financial position must be stated. (Schedule 1, paragraph 64)

Paragraphs 32.10 and 32.11 address similar requirements.

OmniPro comment

See below illustration of the requirements:

General information

XXXXX Limited is primarily engaged in the provision of construction services to both the private and commercial sectors. The company’s’ registered office is Construction Place, Builders Lane, Dunblock, Any City and registered number is XXX.

The company is a limited liability company limited by shares (change if limited by guarantee) please state) incorporated and domiciled in Ireland. Include a comment that the financial statements are being prepared on a break up basis if the entity is being wound up)

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