The Beauty of a well Designed and Executed Process
Whilst consulting down in London for a client, I pop out quite frequently for lunch at a small local Cafe / ‘Wrap- bar’. The establishment is only about 8.5 square metres in size, and customers queue outside in long lines sometimes to get served. Obviously the wraps they serve up at lunch time are very good, but it the process that the proprietor has established, that has struck me as so novel.
FRS105 – The new Financial Reporting Standard for Small Entities (in draft) – (aka – FRED58 at present)
The Financial Reporting Council (FRC) has recently published FRED 58, being the Exposure Draft for FRS105, which in turn will become the new FRSSE (or replace the existing FRSSE, we believe).
Comments on the Exposure Draft was due by 30 April 2015, so if you missed it, we are afraid the the train has already left the station.
In a nutshell, we have some serious conceptual and philosophical concerns the FRED 58 does not address (and staff at the FRC at a recent event in London, prior to the General Election, could not provide assurances on).
Effectively FRS 105 (as it will be know), once it is ratified and adopted in parliament, will not be IFRS ‘Lite-lite‘, although it will have some of the overall principles of Fair Value Accounting contained within it.
At a fundamental level micro-entities (* as defined below) can choose to adopt either FRS 105 or FRS 102. However, be very careful in which one you choose, as the two standards have some fundamental differences contained within them, which, later down the line (as the proverbial can is kicked up the road), might cost you additional compliance fees and time and effort, if you need to convert from FRS 105 reporting to FRS 102 (New UK GAAP).
Our concern is this:
“The overall objective of all the initiatives (driven from Brussels) is HARMONISATION. The differences in approach between FRS 105 and FRS 102 do not underscore this fundamental principle!”
Hence, our health warning:
Think and consult carefully, before adopting either standard (FRS 102 or FRS 105) if you are a micro-entity caught in the compliance reporting net.
If you have any questions or concerns, please contact any Business Accountant in our network for more details.
*Definition of a micro-entity:
Micro-entities – HMRC guidance – May 2015 (as per the HMRC web site at the post’s publishing date)
Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:
a turnover of £632,000 or less
£316,000 or less on its balance sheet
10 employees or less
If your company is a micro-entity, you can:
prepare simpler accounts that meet statutory minimum requirements
send only your balance sheet with less information to Companies House
benefit from the same exemptions available to small companies
FILING CIC (COMMUNITY INTEREST COMPANY) ANNUAL ACCOUNTS
If you have not yet filed Annual Accounts for a CIC (Community Interest Company), then please be aware that the process and procedures for filing the Annual Accounts at Companies House is different from normal electronic filings.
Firstly you cannot file electronic Annual Accounts.
Guidance is published here at the Companies House web site (or click the Companies House logo below).
In order to file the Annual Accounts you will need to prepare a form CIC 34 which can be downloaded from the link.
The completed and signed (by a director or company secretary) CIC 34 form, together with a printed copy of the Annual Accounts and a £15 filing fee must be sent to Companies House well in advance of the filing deadline. This is to avoid any late filing penalties, should Companies House reject the initial filing and you need to make any amendments that might be necessary in order to re-file the Annual Accounts.
Companies House officials were not yet able (during April 2015) to provide us with information as to when the electronic filing of CIC Annual Accounts will be possible.
Hence, just like filing Limited Liability Partnership Annual Accounts, the traditional hard copy and postage paid (preferably recorded delivery) or handing in the documents at a Companies House official Contact Centre office location, is still the only way to get the Annual Accounts filing compliance check done, for the time being.
©3resource – 2015
The Risk-Based Approach – Risky business for SMEs? – Part I
Risk-based approaches to manage Compliance Service delivery are undergoing a maturity model evolution.
This per se is not a negative issue, however, do risk-based approaches leave us exposed to more or less compliance risk?
We pose this question because a number of process advances, including technological drivers have over the past few years increased the incidence of the risk-based approach (r)evolution.
As an example, HMRC launched their risk based approach pilot scheme related to business record keeping called ‘Business Records Check‘ a few years ago (2011), only for the initiative to ‘go quiet’ and then suddenly to rear its head again late in 2013.
From the HMRC web site, the following information was published:
“Up until 17 February 2012, 3,431 BRC had been carried out. These found that 36 per cent of businesses had some issue with their record-keeping of which 10 per cent had issues serious enough to warrant a follow up visit.“
Financial Reporting – Strategic Report – Part II
In the first part of this article we wrote about the statutory underpinnings of the new Strategic Report, as part of the enhanced disclosure regime promoted by international and national financial reporting standard setters.
Today we focus on the content and structure of the Strategic Report.
We start by emphasising that the standard setters and regulator do not want a formulaic report, but being realists we believe that is exactly what the outcome is going to be. The basic idea behind the report is to better inform investors of the business model and strategic intent of the business, together with how this is measured. In other words, where would accountability and responsibility for failure or a the very least, the key risks and uncertainties in the business or wider environment lie.
What is the purpose of the strategic report?
The basic intent is to bring together, in a cohesive and clear manner the most relevant information investors in a business would require – a ‘joined up story’ with the rest of the Financial Statements. As per the Deloitte practical guide it “provides context to the financial statements, an analysis of past performance and insight into the main objectives, strategies, risks – and how these might impact future performance“.
- Objectives & implemented strategy
- Measured against KPIs
- Annual review and future (options)
- Principle Risks and uncertainties faced
- Further considerations
- Environmental & CO2
- Human Rights
- Social & community issues
Now that confidence is returning and the market and investors have a better, clearer and concise understanding of the direction and calculated risks and unavoidable uncertainties any organisation faces, then better outcomes, good, indifferent or bad can be expected.
©2014 – 3resource
Financial Reporting – Strategic Report – Part I
In the excitement of an economic outlook rising like the incoming tide during the last quarter of 2013, together with the ‘silly season’ most of us would probably have missed Statutory Instrument No. 1970 – The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, and off course you would be forgiven for it. This particular statutory instrument made the duty to provide a Strategic Report a part of UK financial reporting legislation.
To most us the update to the Companies Act 2006, Part 15 – Accounts and Reports, will not have any impact, if our our daily task is that of preparing annual statutory financial accounts for approval by the board of directors of a UK incorporated company. This is because under section 414B of the Act, an exemption applies as follows: