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All small companies with accounting periods commencing on or after 1 January 2016 which have not adopted micro entity accounts will have to implement Financial Reporting Standard 102 (FRS 102).  FRS 102 supersedes all previous accounting standards.

The top 5 changes are considered below and in all cases the changes will need to be examined in relation to the current year and associated restatement of the comparative figures.  This will typically mean considering these changes as at the yearend, the prior year end and also the year end prior to this to ensure the figures are shown on a like for like basis.  


Fixed Assets

There is a one off opportunity on transition to revalue a category of fixed assets and utilise this as the base value going forward. There is then no requirement to revalue the assets on a regular basis.  This gives companies a one off opportunity to uplift the value in the balance sheet, particularly in respect of freehold property, and potentially show a significant improvement to the net assets of the company.


Deferred Tax

A deferred tax liability must now be shown on the balance sheet for all revalued assets.  Where a company has a policy of revaluation, or holds investments at valuation, this could give a sudden reduction to the net assets of the company on transition.


Long term loans below market rates 

  • For a loan to be long term there must be a formal agreement in place as at the balance sheet date.  In addition interest should be charged at market rate.  
  • If a loan is long term and the rate of interest is below market rate then the loan will be discounted at the market rate of interest to give a present value and an interest charge posted annually through the accounts equal to the difference in interest rates.
  • If there is no formal agreement in place then a loan will be shown as short term.  This may give a negative current asset position, and associated implications on the credit rating of the business, due to the apparent liquidity issue.  
  • This is likely to be an issue for companies with large director loan account balances, loans from family members and loans from associated companies.



Under FRS 102 goodwill should be amortised over a maximum life of 10 years unless a longer period can be justified with reasonable certainty.


Employee benefits

Under FRS 102 an accrual should be included for outstanding holiday pay.  If your holiday year is in line with your yearend and employees are not allowed to carry forward holiday then there will be no liability.  You could consider amending your holiday year in line with your yearend but you will need to take advice regarding changing the terms of an employee’s contract to ensure the correct procedures are followed.   

If you would like to discuss the impact of FRS 102 on your company in more detail please do not hesitate to contact me