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Transition Limited
Illustrative financial statements
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Transition Limited
Illustrative financial statements
These illustrative financial statements have been prepared to illustrate the key presentational and transitional
disclosure issues on moving from existing UK GAAP to FRS 102. The original accounting formats are prepared under
UK GAAP and are for the year ended 31 December 2014 but in practice you could use earlier accounts on which to
base your planning.
Note the model accounts do not include directors report or audit report since they are not directly covered by FRS
102. There are implications for the directors in that they should seek to ensure that the directors reports is not
inconsistent with the financial statements prepared under FRS 102. Similarly the auditor is required by Companies Act
2006 to report on whether the financial statements are consistent with the accounts.
On a similar basis, where a note to the financial statements is required by the Companies Act but not FRS 102, it is not
included in full e.g. staff cost, directors emoluments, audit fees etc.
The reason that some items are not going to change on the adoption of FRS 102 will be:
(a) Because they are required under the Companies Act and not accounting standards (included in green ink) or
(b) Because FRS 102 is the same as old UK GAAP.
Note that these are not intended to be comprehensive or model accounts. In particular
(a) Not all items which could be included are covered. The financial statements do not include a defined benefit
pension scheme nor share-based payments.
(b) Nor are all detailed disclosures, whether required by the Act or FRS 102 necessarily disclosed. In particular
the disclosures relating to financial instruments are not dealt with.
It is recommended that the first actual FRS 102 accounts are prepared using proprietary model accounts and accounts
disclosure checklists.
Transition Limited
Financial statements for the year ended 31 December 2014
CONTENTS
PAGE
Statement of total recognised gains and losses Statement of other comprehensive income
The page numbers and note numbers are for training / illustration purposes only, as in practice many
would drop out, as indicated in the text.
Transition Limited
Income Statement Profit and loss account for the year ended 31 December 2014
Section 5
Continuing operations
FRS 102 does not require
acquisitions
Total
Total
2014
2014
2013
Acquisitions
Note
TURNOVER
Cost of sales
GROSS PROFIT
Distribution costs
Administrative expenses
Value adjustments
Bad debt
Discontinued
operations
2014
2014
2
FRS 102 requires fair value adjustments on investment properties and
some financial instruments to be recognised in profit and loss account.
These could be include within the format heading Other Operating
Income or a new heading such as value adjustment. These would be
included within operating profit
10
Transition Limited
Statement of other comprehensive income Statement of total recognised gains and losses for the year ended 31
December 2014
Section 5
2014
2013
Under FRS 102 deferred tax is provided on these gains which continue to
be shown in the Statement of Other Comprehensive Income
2013
Transition Limited
Statement of financial position Balance sheet as at 31 December 2014
Company registration number: 122345527
FRS 102
Section 4
2014
Note
FIXED ASSETS
Intangible assets See FRS 102 Sections 18 & 19
Tangible assets Property, plant and equipment See FRS 102
Section 17
Investment property See FRS 102 Section 16
Investments Financial assets See FRS 102 Sections 11 and 12
CURRENT ASSETS
Stocks Inventories FRS 102 Section 13
Debtors FRS 102 Section 11
(including
due in more than 1 year, 2013
)
Investments Financial assets FRS 102 Sections 11 and 12
Cash at bank and in hand FRS 102 Sections 11
CREDITORS
Amounts falling due within one year FRS 102 Sections 11,12
and 22
2013
11
12
13
14
15
16
17
18
19
21
NET ASSETS
CAPITAL AND RESERVES
Called up share capital FRS 102 Section 22
Share premium account FRS 102 Section 22
Revaluation reserve FRS 102 Section 22
Profit and loss account FRS 102 Section 22
22
23
24
25
SHAREHOLDERS FUNDS
26
th
These financial statements were approved and authorised for issue by the Board on 17 July 2015
Signed on behalf of the board of directors
Harry Potter
HARRY POTTER
- Director
th
17 July 2015
The notes on pages 8 to 27 form part of these financial statements.
Transition Limited
Statement of changes in equity for the year ended 31 December 2014
Section 6
The Statement of changes in equity (SOCE) is introduced by FRS 102 and replaces the reconciliation of the
movement in shareholders funds required by FRS 3. Unlike that reconciliation which could be included within
the notes the SOCE is a primary statement.
Share Capital
Share
Premium
Revaluation
Reserve
Retained
earnings
Total
FRS 102 6.4 permits the inclusion of a single statement of income and retained earnings where the only changes in
equity are profit or loss, payment of dividends, corrections of prior period material errors and changes in accounting
policy. Where any of the highlighted items appear a statement of income and retained earnings is not permitted.
Transition Limited
Statement of cash flows Cash flow statement for the year ended 31 December 2014
Note
Section 7
2014
2013
Operating profit
Depreciation charges
Increase in stocks
Increase in debtors
Increase in creditors
Note also that the notes to the Cashflow statement required by FRS 1 and included here
at notes 34 and 35 are not required by FRS 102.
30
30
30
Increase in cash
FRS 1 requires a reconciliation of net cash flow to movement in net debt. This may be given, as here adjacent to the cash flow
statement or in the notes.
FRS 102 does not require a reconciliation of cash to net debt. Indeed net debt is not considered in FRS 102. However in Staff
Education Note 1 it was noted that a project undertaken by the Financial Reporting Lab of the FRC found that a majority of
investors use a net debt reconciliation or reconciliation of net cash flows to net debt when one is presented. The Lab encouraged
companies to consider how this might be relevant to their own circumstances and fi so enhance their reporting to meet investor
needs.
2014
2013
20
Net debt at
20
Transition Limited
Statement of cash flows Cash flow statement for the year ended 31 December 2014
Cash flows from operating activities
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
1
STATUTORY INFORMATION
Transition Limited is a company domiciled in England and Wales, registration number 122345577. The registered
office is Hogwarts Castle, Somewhere, County, HW1 1GF.
FRS 102 3.24 requires disclosure of the legal form of the entity, its country of incorporation and the address of its
registered offices (or principal place of business if different from the registered office.
FRS 102 also requires disclosure of the nature of the operations and its principal activities unless disclosed in a
business review or similar document. Companies are required to include such disclosure in the directors report.
2
The accounts have been prepared in accordance with applicable accounting standards FRS 102. There were no
material departures from those that standards.
FRS 102 3.4 requires an unreserved statement of compliance with the standard in the notes. This could be
incorporated within the accounting policies note, or as here as a separate note.
3
ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention as modified by the revaluation of
certain fixed assets. The presentation currency is sterling.
FRS 102 3.23 (d) requires disclosure of the presentation currency as defined in Section 30. This is defined as The
currency in which the financial statements are presented. It can be argued that the use of the sign for each column,
note etc. fulfils that requirement, or it can be included as a separate note as here.
The accounting policy notes which follow are those included under previous GAAP. On transition the policies will be
under FRS 102. The annotations in red in this section illustrate areas where change may be necessary. This is not an
exhaustive list of accounting policies or potential changes but for illustration purposes only.
Goodwill and intangibles
Goodwill is capitalised and has an indefinite life. It is not being amortised but is subject to annual impairment review.
To date no goodwill has been written off.
FRS 102 requires initial recognition at cost, and then gives an accounting policy choice of the cost model or the
revaluation model.
UK Training (Worldwide) Limited
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Transition Limited
Notes to the financial statements for the year ended 31 December 2014
FRS 102 requires goodwill to have a finite life. In the absence of a readily ascertainable useful life, useful life must not
exceed 5 years.
Since FRS 102 will result in the inclusion of more intangibles separate from goodwill, there may be a requirement for
more detailed accounting policy notes to cover inter alia, useful lives.
Research and development
Expenditure on research and development is written off against profits in the year in which it is incurred.
SSAP 13 requires research expenditure to be written off and gives a choice in relation to the recognition of
development expenditure as an intangible provided certain criteria are met. FRS 102 continues to permits such
capitalisation. IFRS for SME does not. IFRS requires it!
There is a transitional exemption in 35.10 (n) permitting the use of costs recognised under SSAP 13 as its deemed cost
at the date of transition. If used, this exemption should be referred to in the accounting policy.
There may be other internally generated intangibles which may be capitalised under FRS 102 18.8-10A
Property, plant and equipment Tangible fixed assets - depreciation and amortisation
Depreciation has been computed to write off the cost of tangible fixed assets over their expected useful lives using
the following rates:
Freehold land
Freehold buildings
Leasehold property
Plant and machinery
Fixtures and fittings
Motor vehicles
No depreciation
2% per annum of cost
equal instalments over the period of the lease
% per annum of cost/net book value
% per annum of cost/net book value
% per annum of cost/net book value
Other than for entities taking the option to use the revaluation model, FRS 102 is not expected to change depreciation
policies.
Note however that residual value is reassessed at the end of each accounting period, unlike under FRS 15. This may
impact on the amount of depreciation charged.
Where an entity takes advantage of the exemptions in FRS 102 35.10 to include fair value or previous revaluations as
deemed cost, this will need to be reflected in the accounting policy note.
Leasing
Tangible fixed assets Property, plant and equipment acquired under finance leases or hire purchase contracts are
capitalised and depreciated in the same manner as other tangible fixed assets. The related obligations, net of future
finance charges, are included in creditors.
Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the
period of the lease.
The benefits of lease incentives are recognised in profit and loss account over the shorter of the lease period and the
period to the next rent review at which rent is expected to be reset to market rates.
In general, it is expected that few lease classifications under SSAP 19 will be treated differently under FRS 102, but
lease agreements should be checked to confirm.
The accounting treatment under FRS 102 is the same as under SSAP 19.
FRS 102 requires lease incentives to be recognised over the term of the lease.
UK Training (Worldwide) Limited
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Transition Limited
Notes to the financial statements for the year ended 31 December 2014
If the entity takes advantage of either of the exemptions in FRS 102 section 35, this should be recognised in the
accounting policy notes. The exemptions relate to:
(a) lease incentives the option to continue to treat incentives received on leases entered into before the date
of transition;
(b) arrangements containing a lease the option to determine whether an arrangement contains a lease at the
date of transition, rather than at the date of commencement of the lease.
Investment property
Investment property is carried at market value fair value. Revaluation surpluses are recognised in the Statement of
Total Recognised Gains and Losses income statement. Deferred taxation is not provided on these gains as there is no
current intention to dispose of them at the rate expected to apply when the property is sold.
FRS 102 requires valuation at fair value, unless fair value cannot be obtained without undue cost or effort, gains to be
recognised in profit and loss and deferred tax to be provided.
Where fair value cannot be achieved without undue cost or effort investment property should be accounted for as
property, plant and equipment.
Where the entity takes advantage of the transitional exemptions in 35.10 (c) or (d) relating to use of fair value or
revaluation should be included in the accounting policy note.
Stocks (and work in progress) Inventories
Stocks (and work in progress) Inventories have been valued at the lower of cost and net realisable value estimated
selling price less costs to sell. In respect of work in progress and finished goods, cost includes a relevant proportion of
overheads according to the stage of manufacture/completion.
FRS 102 is unlikely to see a change in accounting policies from those adopted under SSAP 9, other than the changes in
terminology.
Note that construction contract work in progress is now dealt with in FRS 102 Section 23 : Revenue rather than in the
Inventories section, but again the accounting policy is unlikely to change.
Income recognition
Income is recognised when goods have been delivered to customers such that risks and rewards of ownership have
transferred to them.
The general view amongst commentators is that FRS 102 is unlikely to result in changes to income recognition
accounting policies, provided, of course that the entitys policies complied with previous GAAP e.g. FRS 5 and UITF 40
(see for example Staff Education Note 7.)
One area which may give rise to change is the explicit requirement in FRS 102 23.5 that where payment is deferred
under a financing transaction the fair value of the consideration is measured at the fair value of all future receipts
determined using an imputed rate of interest, although even here FRS 5.38 requires that where the time effect of
money is material the amount of the revenue recognised in the period should be the present value of the cash inflows
expected to be received. In other words such revenues should have been discounted under FRS 5.
Deferred taxation
Deferred taxation is provided on the liability method to take account of timing differences between the treatment of
certain items for accounts purposes and their treatment for tax purposes.
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10
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
Tax deferred or accelerated is accounted for in respect of all material timing differences except on the revaluation of
freehold property and investment property unless, by the balance sheet date, the reporting entity has:
(a) entered into a binding agreement to sell the revalued assets; and
(b) recognised the gains and losses expected to arise on sale.
FRS 102 removes the current exemptions in FRS 19
Deferred tax assets and liabilities are discounted to reflect the time value of money.
FRS 102 prohibits discounting of deferred tax.
Foreign exchange
Transactions denominated in foreign currencies are translated into sterling and recorded at the rate of exchange
ruling at the date of the transaction.
Balances at the year-end denominated in a foreign currency are translated into sterling at the rate of exchange ruling
at the balance sheet date.
FRS 102 allows the use of a presentation currency as well as a functional currency. The functional currency, which is
The currency of the primary economic environment in which the entity operates.
It is expected that few entities will choose a different currency than the functional currency, but if an entity does so,
then the accounting policy will need to be adapted.
One area where the current accounting policy may need to change under FRS 102 is that SSAP 20 allowed an entity to
translate purchases in foreign currencies at the rate of exchange specified in a matching forward contract. This is not
permitted by FRS 102 which requires purchases to be translated using the spot exchange rate on the date of the
transaction. There is an example in Staff Education Note 13 illustrating this and the related treatment of the
derivative financial instrument.
Pension costs
The company operates a defined contribution scheme for the benefit of its employees. Contributions payable are
recognised in profit and loss account when due.
FRS 102 potentially changes the treatment of defined benefit schemes which are multi-employer or group schemes,
and where such changes apply, this should be reflected in the accounting policies.
Financial instruments
It is quite possible that an entity does not already have an accounting policy for financial instruments. Even if it does it
is probable that it will need to be amended to reflect the changes required by FRS 102 Sections 11 and 12.
Staff Education Notes 2 and 13 give illustrations of the practical implications on transition.
4
TURNOVER
The companys turnover represents the value, excluding value added tax, of goods and services supplied to customers
during the year/period.
The analysis of turnover by activity and geographical area is as follows:
The segmental reporting requirements of SSAP 25 have been dropped. Where an entity is required to give segmental
reporting information, for example under the AIM rules, FRS 102 cross refers to IFRS 8 which should be followed.
11
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
5
Since FRS 102 does not require the disclosure of operating profit, the disclosures
in this section which are primarily required by the Companies Act will probably
be cross2014
referred to profit before tax. 2013
AUDITORS REMUNERATION
The disclosures are required under CA 2006 and are not repeated here as they are not impacted by FRS 102.
7
DIRECTORS' REMUNERATION
The disclosures are required under CA 2006 and are not repeated here as they are not impacted by FRS 102.
FRS 102 requires disclosure of aggregate key management remuneration, in addition to any disclosure of
directors or similar remuneration required by CA 2006. Where the only members of key management are the
directors a statement to that effect will suffice. Where there are no directors emoluments or similar
disclosures, this information will probably be given in the related parties note.
STAFF COSTS
The disclosures are required under CA 2006 and are not repeated here as they are not impacted by FRS 102.
9
Interest payable
2013
12
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
10
2014
2013
Foreign tax
Discounting is not
permitted by FRS 102.
FRS 102 29.10
(b)
The detailed disclosure requirements of paragraph 64 of FRS 19 relating to the circumstances affecting
current and future years are not included in FRS 102. FRS 102 requires disclosure of:
(a) The aggregate current and deferred tax relating to items that are recognised as items of other
comprehensive income;
(b) The reconciliation between:
i.
The tax expense (income) included in profit or loss; and
ii.
The profit or loss on ordinary activities before tax multiplied by the applicable tax rate;
(c) The amount of the net reversal of deferred tax assets and deferred tax liabilities expected to occur
during the period beginning after the reporting period together with a brief explanation for the expected
reversal;
(d) An explanation of the changes in the applicable tax rates compared with the previous reporting period
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Transition Limited
Notes to the financial statements for the year ended 31 December 2014
(e) The amount of deferred tax liabilities and deferred tax assets at the end of the reporting period for each
type of timing difference and the amount of unused tax credits; and
(f) The expiry date, if any, of timing differences, unused tax losses and unused tax credits.
The tax assessed for the period is lower than the standard rate of corporation tax in the UK (%). The
differences are explained below:
2014
2013
The reconciliation of the tax charge under FRS 19 is the current tax charge, under
FRS 102 it is the total tax charge included in profit and loss i.e. it excludes tax in
other comprehensive income and equity.
(c)
14
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
11
Goodwill
Total
Cost:
At 1 January 2014
Additions
Disposals
At 31 December 2014
Amortisation:
At 1 January 2014
Charge for the year
Impairment
Eliminated on disposals
At 31 December 2014
At 31 December 2013
FRS 102 requires disclosure of the description, carrying amount and remaining amortisation period of any individual
intangible asset that is material to the entitys financial statements.
Under Section 27, an impairment review is only required when there is an indicator of impairment. Under FRS 10 and
11 an impairment review was required where the life of an intangible asset was > 20 years, and in the first year after a
business combination. The treatment under section 27 is the same as under FRS 11 i.e. compare the carrying amount
with the recoverable amount, which is defined as the higher of value in use and fair value less costs to sell.
There are additional disclosure requirements where intangible assets are accounted for under the revaluation
method. These disclosures are:
(a)
(b)
(c)
(d)
Date;
Whether an independent valuer was involved;
The methods and significant assumptions; and
For each revalued class of intangible assets, the carrying amount that would have been recognised had the
asset been included under the cost model.
15
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
12
Land and
buildings
Plant and
machinery
Fixtures
and
fittings
Motor
vehicles
Total
Cost (* or valuation):
At 1 January 2014
Additions
Disposals
At 31 December 2014
Depreciation:
At 1 January 2014
Charge for the year
Impairment
Eliminated on disposals
At 31 December 2014
Net book value:
At 31 December 2014
At 31 December 2013
The cost of depreciable assets included in land and buildings at 31 December 2014 was
Included in the total net book value of tangible fixed assets held at 31 December 2014 was
assets held under finance leases and hire purchase contracts.
in respect of
FRS 102 gives an accounting policy choice of the cost or revaluation model.
What is capitalised, and depreciation policies and useful lives are unlikely to be significantly different from those
under FRS 15.
Where the revaluation model is used, the only requirement is to keep the valuations sufficiently up to date such that
the carrying value is not materially different from fair value. There is no requirement for independent or qualified
valuers. Section 17 is perceived to be less onerous than FRS 15 which required a full valuation every 5 years and an
interim valuation at the end of year.
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16
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
Residual value is assessed at the end of each reporting period. Under FRS 15 this was initially assessed and not
revised.
Under Section 27, an impairment review is only required when there is an indicator of impairment. Under FRS 11 an
impairment review was required where no depreciation was charged on the grounds that it would be immaterial or
where the life of a tangible asset was > 50 years. The treatment under section 27 is the same as under FRS 11 i.e.
compare the carrying amount with the recoverable amount, which is defined as the higher of value in use and fair
value less costs to sell.
The disclosures under FRS 102 are similar to those under FRS 15 including the disclosure of the carrying value under
the cost basis where the revaluation model is used.
FRS 102 also includes disclosure requirements for the following, which are already required for companies under CA
2006:
(a) The existence and carrying amounts of property, plant and equipment to which the entity has restricted title
or that is pledged as security for liabilities; and
(b) The amount of contractual commitments for the acquisition of property, plant and equipment.
13
INVESTMENT PROPERTY
Total
Investment property is not one of the format headings and could be included within tangible fixed assets or under
investments or, as here, as a separate heading.
The key changes in the treatment of investment properties are covered in the accounting policy note above.
There is no requirement for a qualified or independent valuer.
14
Listed
Unlisted
Total
FRS 102 will change the default position for many of these
investments such that they should be included at fair value
i.e. listed investments and others which can be measured
reliably. Under current UK GAAP, many of these will be
carried at cost less impairment.
17
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
At the end of the year/period the market value of listed investments was
15
(2013 -
2013
FRS 102 requires disclosure of the amount of inventories recognised as an expense in the period (FRS 13.22).
Inventories are subject to impairment review under Section 27 on an annual basis. This is likely to give the same
results as the current recognition of provisions for slow moving and obsolete stock. However, FRS 102 13.22 requires
disclosure of impairment losses recognised or reversed during the year, which was not required by SSAP 9.
FRS 102 permits the capitalisation of borrowing costs in inventories. Under previous GAAP it was permitted only in
relation to tangible fixed assets under FRS 15. If such a policy is adopted the following disclosures are required:
(a) Details of the accounting policy;
(b) The fact that the transitional exemption under 35.10 (o) has been used, where relevant. This permits the
capitalisation to commence from the date of transition;
(c) The amount of borrowing costs capitalised in the period; and
(d) The capitalisation rate used.
16
DEBTORS
2014
2013
Trade debtors
Amounts owed by group undertakings
Amounts owed by undertakings in which the company
has a participating interest
Other debtors
Prepayments and accrued income
Staff Education Note 3 gives some guidance on impairment of trade debtors. FRS 102 requires debtors to be included
at amortised cost. In practice this is likely to produce the same results as the current provision for bad and doubtful
debts. However FRS 102 is more prescriptive in requiring objective evidence of impairment.
Particular care is required when recording sales and trade debtors where sales includes a financing element.
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Transition Limited
Notes to the financial statements for the year ended 31 December 2014
17
2014
FRS 102 will change the default position for many of these
investments such that they should be included at fair value
i.e. listed investments and others which can be measured
reliably. Under current UK GAAP, many of these will be
carried at cost less impairment.
2013
2013
Debenture loans
Bank loans and overdrafts
Payments received on account
Trade creditors
Bills of exchange payable
Amounts owed to group undertakings
Amounts owed to undertakings in which the company has
a participating interest
Other creditors
Financial liabilities
Corporation tax
Other tax and social security
Obligations under finance leases and hire purchase
contracts
Accruals and deferred income
19
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
These illustrative financial statements do not include the detailed disclosure requirements relating to financial
instruments.
19
2013
Debenture loans
Bank loans and overdrafts
Payments received on account
Trade creditors
Bills of exchange payable
Amounts owed to group undertakings
Amounts owed to undertakings in which the company has
a participating interest
Other creditors
Corporation tax
Financial liabilities
Other tax and social security
Obligations under finance leases and hire purchase
contracts
Accruals and deferred income
20
BORROWINGS
2014
2013
20
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
21
Other
provisions
Total
2014
2013
Deferred tax:
Accelerated capital allowances
Tax losses carried forward
Undiscounted provision for deferred tax
Discount
Discounted provision for deferred tax
The introduction of the Statement of changes in equity is likely to mean that many of these notes become redundant or are given as
supplementary to, perhaps on the face of that statement, especially when there are no changes in share capital during the period.
22
SHARE CAPITAL
Allotted called up and fully paid
(Number)
(Number)
Ordinary shares of
Cumulative / Non-cumulative /
Redeemable / Coupon Preference
Shares* of
each
On
20
an aggregate consideration of
The
20
20
2014
2013
each
21
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
FRS 102 includes the following disclosure requirements some of which exceed the disclosure requirements of
CA 2006, and impose requirements on other financial statements which may not be required currently:
For each class of share capital:
o Number of shares issues and fully paid, and issued but not fully paid;
o Par value per share or that the shares have no par value;
o A reconciliation of the number of shares outstanding at the beginning and end of the
period. This reconciliation need not be presented for prior periods;
o The rights, preferences and restrictions attaching to that class including restrictions on the
distribution of dividends and the repayment of capital;
o Shares in the entity held by the entity or by its subsidiaries, associates or joint ventures;
o Shares reserved for issue under options and contracts for the sale of shares, including the
terms and conditions
A description of each reserve within equity
An entity without share capital shall disclose equivalent information as that for shares showing
changes during the period, and the rights, preferences and restrictions attaching to each class of
equity.
23
2014
At
2013
20
20
24
REVALUATION RESERVE
2014
At
2013
20
20
25
2013
22
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
20
At
20
The reconciliation of shareholders funds has been replaced by the Statement of changes in equity which must
appear as a primary statement and not in the notes.
26
2013
27
ADVANCES TO DIRECTORS
During the period a director, Mr H Potter received an interest free loan of 25,000 to enable him to carry out
his duties. The amount outstanding at the year-end was 25,000.
28
29
CONTROLLING PARTY
FRS 102 removes the requirement to disclose the name of the related party. Care
should be taken where the related party is a director as disclosure of the name may be
required by Companies Act 2006.
30
31
CAPITAL COMMITMENTS
FRS 102 includes a requirement for disclosure of the amount of contractual commitments for
20
the acquisition of property, plant and equipment. Previously this was only a requirements
under the Companies Act.
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20
23
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
32
LEASING COMMITMENTS
Note the change to disclosure of total commitments (see FRS 102). This figure will therefore
change more frequently (annually?) than under SSAP 21!
The company had annual total commitments under non-cancellable operating leases as detailed below:
20
Land and
Buildings
20
Land and
Buildings
Other
Other
33
FRS 102 does not include the distinction between leases of land
and buildings and other required by SSAP 21. A total will suffice
for each time period
34
PENSION COSTS
The company operates a defined contribution pension scheme. The assets of the scheme are held separately
from those of the company in an independently administered fund. The pension cost charge represents
contributions payable by the company to the fund and amounted to
(20 -
).
Contributions totalling
(20 - ) were payable to the fund at the year-end and are included in
creditors.
35
Capital expenditure
Payments to acquire intangible fixed assets
Payments to acquire tangible fixed assets
Receipts from sales of tangible fixed assets
24
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
Management of liquid resources
Purchase of treasury bills
Sales of treasury bills
Financing
Issue of ordinary share capital
Repurchase of debenture loan
Expenses paid in connection with share issues
36
At 1 January
2014
Cash flows
Other
changes
At 31
December
2014
TOTAL
25
Transition Limited
Notes to the financial statements for the year ended 31 December 2014
EXPLANATION OF TRANSITION
As part of the explanation required by FRS 102, sections 35.12, 35.13 requires the following:
(a) A description of the nature of each change in accounting policy;
(b) Reconciliations of its equity determined in accordance with its previous financial reporting framework to its
equity determined in accordance with FRS 102 for both the date of transition and the most recent statement of
financial position;
(c) A reconciliation of the profit or loss determined in accordance with its previous financial reporting framework for
the latest period in the entitys most recent financial statements to its profit or loss
FRS 102 does not give any guidance on the form of the reconciliations required in relation to the reconciliations of
equity or profit or loss, or of the explanation of the effects of transition. The following illustrations are based on those
included in Staff Education Note 13: Transition to FRS 102.
Staff Education Note 13 gives 2 options for the reconciliations and both are illustrated here.
The illustrations in Staff Education Note 13 include monetary amounts which are gross i.e. before taxation. No change
in shown in the taxation figure in the illustration. In practice these changes may well be taxable or tax allowable. It
may therefore be appropriate to note the tax effects of the changes in the explanation of transition.
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Transition Limited
Notes to the financial statements for the year ended 31 December 2014
37
RECONCILIATION OF EQUITY
Option 1
At 1 January 2014
Note
As
previously
stated
Effect of
transition
At 31 December 2014
FRS 102
(as
restated)
As
previously
stated
Effect of
transition
FRS 102
(as
restated)
Fixed assets
Current assets
Creditors: amounts falling due
within one year
Net current assets
Total assets less current
liabilities
Creditors: amounts falling due
after more than one year
Provisions for liabilities
Net assets
Capital and reserves
Option 2
Note
1 January
2014
31 December
2014
38
Option 1
Notes
Turnover
Cost of sales
Gross profit
Administrative expenses
Other operating income
Operating profit
Interest receivable and similar income
Interest payable and similar charges
Profit before taxation
Taxation
Profit on ordinary activities after taxation and
for the financial year
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Transition Limited
Notes to the financial statements for the year ended 31 December 2014
Option 2
Note
Year ended
31 December
2014
NOTES TO RECONCILIATIONS
Financial instruments
Transition Ltd was not previously required to recognise derivative financial instruments on the balance sheet.
Instead the effects of the derivative financial instruments were recognised in profit or loss on settlement.
Under FRS 102, derivative financial instruments are classified as other financial instruments and are
recognised as a financial asset or a financial liability, at fair value, when an entity becomes party to the
contractual provisions of the instrument.
On the adoption of the requirements of FRS 102, financial assets of Y and financial liabilities of Y have been
recognised on the balance sheet at the date of transition, 1 January 2014.
At 31 December 2014, the fair values of the financial assets and financial liabilities were Y and Y
respectively.
In accordance with the accounting policy in 1 above the difference between the fair values of Y-X has been
recognised in profit and loss for the year.
(b)
(c)
Lease incentives
Prior to the adoption of FRS 102, Transition Ltd had recognised the benefit of lease incentives over the
shorter of the life of the lease of the period to the date of the next rent review at which rent is expected to
be reset to a market rate.
FRS 102 requires such incentives to be recognised over the life of the lease but includes an exemption which
allows an entity to continue with that policy for leases entered into before the date of transition. Transition
Ltd has taken advantage of the exemption and accordingly there is no adjustment to the balance sheet at 1
January 2014.
Lease incentives obtained in 2014 have been restated in accordance with FRS 102 resulting in an increase in
lease expenses charged and a reduction in deferred income of M.
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