[et_pb_section admin_label=”Header – All Pages” global_module=”1221″ transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”||0px|”][et_pb_row global_parent=”1221″ admin_label=”row”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ admin_label=”Post Title” title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” title_all_caps=”off” meta_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [/et_pb_post_title][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” global_module=”1228″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”0px||0px|” padding_mobile=”on” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row global_parent=”1228″ admin_label=”Row” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”0px||0px|” padding_mobile=”off” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ admin_label=”Text” background_layout=”light” text_orientation=”left” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”]
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”http://www.frs102.com/members/premium-toolkit/” type=”big” color=”red”] Return to Main Index[/button] [/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”https://uk.frs102.com/members/premium-toolkit/section-22/” type=”big” color=”red”] Return to Section 22 Home[/button] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”]| Old GAAP | FRS 102 | Further Comment On Differences |
| Share Capital | Liabilities & Equity (S.22) | |
| Equity instruments are initially recognised at the fair value of the consideration received, except where legal reliefs or exemptions that allow for a different measurement basis are used. | Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of direct issue costs. | No differences. |
| This was not specifically referred to under old GAAP.
|
If the entity receives the cash or other resources before equity instruments are issued, and the entity cannot be required to repay the cash or other resources received, the entity recognises the corresponding increase in equity. | No differences expected in this area, as what is now made clear under FRS 102 was what was previously adopted under old GAAP. |
| An increase in minority interest can give rise to goodwill (as acquisition accounting had to be used) and a decrease in minority interest to gains and losses on disposal. | Increases or decreases of non-controlling interests are required to be accounted for as equity transactions (i.e. when control does not change). | This is a significant difference which will require an adjustment on transition. Section 35.9 however makes it clear that where such acquisitions or disposals occurred pre transition date, they must not be restated, instead FRS 102 is applied prospectively. There is no choice to retrospectively adjust. Hence where acquisitions or disposals have occurred in the comparative year included in the first set of FRS 102 financial statements a transition adjustment will be required. See attached an example for an acquisition of a non-controlling interest since the date of transition (Example 89 – Acquisition Not Resulting In A Change Of Control After Date Of Transition).
See attached an example for a disposal not resulting in a loss of control since the date of transition (Example 90 – Disposal Resulting In No Change In Control In The Subsidiary After Date Of Transition). |
| Other presentations allowed. | Non-controlling interest to be included in equity and as an appropriation of profit and total comprehensive income. | This is a disclosure difference. Previously this type of disclosure was not required under old GAAP. See attached example illustrating this requirement (Example 91 – Extract Of Statement Of Changes In Equity From Financial Statements). |
| FRS 25 was silent on this issue and did not require disclosure.
|
Fair value of non-cash asset distributions must be disclosed. | This is a disclosure difference and therefore the FRS 102 financial statements should disclose same when applicable. This would be applicable to a distribution of a business to another party/entity or the distribution of property etc. to the shareholder for example as the amount debited as a distribution is the book amount and not the fair value. |
| Transaction cost could be expensed and where deducted against equity, it was gross and not net of tax.
|
Transaction costs should be deducted from equity net of taxes. | Where transaction costs have been incurred on issuance of shares since the date of acquisition and these costs have not been set against equity a transition adjustment will be required where material.
Where these are material the journals required for such an adjustment in the opening balance sheet would be to: Dr Profit and loss reserves Cr Ordinary share capital/premium with the net of tax transaction costs. Where the shares were issued since the date of transition, the journals required are to: Dr Ordinary share capital/share premium with the net of tax cost. Cr Administrative expenses (Assuming the costs were initially posted to this line item) Cr Tax in P&L Where under old GAAP the transaction costs have been netted against equity but the tax deduction has not, it is very unlikely an adjustment will be required on the basis that it is unlikely to be material. |
| FRS 25 provides detailed guidance on puttable features and instruments imposing an obligation to deliver a pro rata share of the net assets of the entity only on liquidation. It also addresses the reclassification (and accounting on reclassification) of such instruments between equity and financial liabilities. | Less detailed guidance provided, however, it is likely FRS 25 guidance will be utilised. | Although there is less guidance in Section 22, it is unlikely that there will be any differences as IFRS (which is the same as old GAAP) will be utilised. |
| Not applicable. | Section 35.10(g) provides an exemption whereby a first time adopter does not have to split a compound financial instrument if the liability component is not outstanding at the date of the transition.
Section 35.9 deals with non-controlling interests and mandates that the below should be applied prospectively from the date of transition: · to allocate profit and loss and total comprehensive income between non-controlling interest and owners of the parent; · for accounting for changes in parents’ ownership in a subsidiary that does not result in loss of control; and · for accounting for a loss of control over a subsidiary. |
Given that old GAAP (FRS 25) was almost identical to Section 22, it is unlikely that many preparers will need to avail of this exemption. If there was an error in accounting for such a financial instrument a prior year adjustment would have to be shown.
Where the aforementioned arises they must be applied prospectively. |
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]