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[/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-5/” type=”big” color=”red”] Return to Section 5 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” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]Analysis of expenses
Extract from FRS102: Section 5.11
5.11 Unless otherwise required under the Regulations, an entity shall present an analysis of expenses using a classification based on either the nature of expenses or the function of expenses within the entity, whichever provides information that is reliable and more relevant.
Analysis by nature of expense
(a) Under this method of classification, expenses are aggregated in the statement of comprehensive income (or in the income statement, under the two-statement approach) according to their nature (e.g. depreciation, raw materials and consumables and staff costs), and are not reallocated among various functions within the entity.
Analysis by function of expense
(b) Under this method of classification, expenses are aggregated according to their function as part of cost of sales or, for example, the costs of distribution or administrative activities.
OmniPro comment
Analysis by function of expense
Where format 1 of the Companies Act is adopted then this represents the analysis by function approach. This is the approach taken in the examples above. Care must be given to ensure expenses actually included within the function actually relate to that function. For example professional fees for preparation/audit of financial statements should not be included within cost of sales.
Example 6A See below the extract from format 1 of the Companies Act 2014 for the Republic of Ireland:
- Turnover
- Cost of sales
- Gross profit or loss
- Distribution costs
- Administrative expenses
- Other operating income
- Income from shares in group undertakings
- Income from participating interests
- Income from other financial assets
- Other interest receivable and similar income
- Amounts written off financial assets and investments held as current assets
- Interest payable and similar charges
- Tax on profit or loss on ordinary activities
- Profit or loss on ordinary activities
- Other taxes not shown under the above items
- Profit or loss for the financial year
Example 6B: See below the extract from format 1 of the Companies Act 2006 for the UK
- Turnover
- Cost of sales
- Gross profit or loss
- Distribution costs
- Administrative expenses
- Other operating income
- Income from shares in group undertakings
- Income from participating interests
- Income from other fixed asset investments
- Other interest receivable and similar income
- Amounts written off investments
- Interest payable and similar expenses
- Tax on profit or loss
- Profit or loss after taxation
- Other taxes not shown under the above items
- Profit or loss for the financial year
Analysis by nature of expense
Where format 2 of the Companies Act is adopted then this represents the analysis by nature of expense approach.
Example 6C See below the extract from format 2 of the Companies Act 2014 for the Republic of Ireland:
- Turnover
- Variation in stock of finished goods and in work in progress
- Own work capitalised
- Other operating income
- Raw materials and consumables
- Other external charges
- Staff costs:
- Wages and salaries
- Social insurance costs
- other retirement benefit costs
- other compensation costs
- Depreciation and other amounts written off tangible and intangible fixed assets
- Exceptional amounts written off current assets
- Other operating charges
- Income from shares in group undertakings
- Income from participating interests
- Income from other financial assets
- Other interest receivable and similar income
- Amounts written off financial assets and investments held as current assets
- Interest payable and similar charges
- Tax on profit or loss on ordinary activities
- Profit or loss on ordinary activities after taxation
- Other taxes not shown under the above items
Profit or loss for the financial year
Example 6D: See below the extract from format 2 of the Companies Act 2006 for the UK:
- Turnover
- Change in stock of finished goods and in work in progress
- Own work capitalised
- Other operating income
- Raw materials and consumables
- Other external charges
- Staff costs:
- Wages and salaries
- Social insurance costs
- other retirement benefit costs
- other compensation costs
- Depreciation and other amounts written off tangible and intangible fixed assets
- Amounts written off current assets to the extent that they exceed write-offs which are normal in the undertaking concerned.
- Other operating expenses
- Income from shares in group undertakings
- Income from participating interests
- Income from other fixed asset investments
- Other interest receivable and similar income
- Amounts written off investments
- Interest payable and similar expenses
- Tax on profit or loss
- Profit or loss after taxation
- Other taxes not shown under the above items
- Profit or loss for the financial year
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