by John McCarthy Consulting Ltd. | Sep 2, 2016 | News
Since the implementation of the new Companies Act, 2014 on 1 June 2015, the financial statements of regulated insurance intermediaries and investment brokers will no longer qualify for certain exemptions.
Those affected are those carrying on business under the Insurance Act, 1989 or otherwise authorised by the Central Bank. The full list of entities affected is on the 5th Schedule of the Companies Act, 2014
This applies to financial statements approved by the directors on/after 1 June 2015 and means they:
1. Are not allowed to qualify for the ‘small’ or ‘medium’ thresholds as defined in company law;
2. Cannot abridge their financial statements. They must file full accounts with the CRO;
3. Cannot avail of audit exemption;
4. Cannot avail of the FRSSE (the Financial Reporting Standard for Smaller Entities (January 2015);
5. Must apply FRS 102 in full with effect from financial years commencing on/after 1 January 2015 (including a compulsory cash flow statement);
6. Must disclose auditor remuneration in the four categories required by section 322 of the Companies Act, 2014 (along with comparatives);
7. Cannot use FRS 105, the proposed micro-entities standard, when it is endorsed in Irish company law (expected to be signed off later this year);
8. Will not be allowed adopt section 1A of FRS 102 even after it has been endorsed in Irish company law (expected to be signed off later this year for certain other entities).
9. Will not be allowed use the PASE (Provisions Available for Smaller Entities) as the entity is deemed to be large.
To hear more about financial reporting developments in FRS 102 and in FRS 102 for Charities (and other Not for Profit Entities) including the Charities SORP please come to our upcoming training days in Dublin and Cork. See our CPD courses page for the latest news.
by John McCarthy Consulting Ltd. | Jun 10, 2016 | News
The proposed Companies (Accounting), Act 2016 is expected to make some changes in Irish company law. These changes have been expected almost since the Companies Act 2014 became effective on 1 June 2015. Publication of this new company law has been delayed by the formation of the new Government. We understand that legislators are actively working on the new law at present.
We covered the new company law as well as its potential impact on current accounting practice in FRS 102 and with the proposed FRS 105 accounting standards, at our public seminar on Monday 27 June 2016 at the Talbot Hotel, Stillorgan, County Dublin. More seminas will take place in 2016 and 2017. see our CPD Courses page for details.
Among the changes expected in the new law are:
Increased thresholds for company sizes
The new Act will trigger an increase in the accounting disclosure thresholds for company sizes. The existing size thresholds are shown in brackets.
- Small Company – a turnover of €12m (€8.8m), 50 employees with a balance sheet of €6m (€4.4m);
- Small Group – a turnover of €12m (€8.8m) net or €14.4m gross, 50 employees with a balance sheet of €6m (€4.4m) net or €7.2m gross. The reference to the term ‘gross’, is before taking account of any consolidation adjustments;
- Medium Company – a turnover of €40m (€20m), 250 employees with a balance sheet of €20m (€10m).
Micro Companies and Directors Remuneration
One of the key features of the new Bill is that micro companies (those with turnover of less than €700,000, among other criteria) will be exempt from Sections 305 to 312 of the Companies Act, 2014 which require disclosure of directors’ remuneration and certain loan arrangements.
This is likely to appeal to many company directors who wish to keep their remuneration and loan arrangements private. Those companies classified as ‘small’ will still be required to disclose directors’ remuneration and loan details in their financial statements. Certain ineligible entities cannot be micro companies and these include financially regulated entities like investment intermediaries.
In addition, directors of micro companies will not have to a file director’s report.
Medium Sized companies
Medium sized companies will have to file full financial statements as Section 354 of CA 2014 will be deleted from Irish company law. At present they do not need to disclose certain matters including their turnover.
The commencement date of the new law is not yet certain and it remains to be seen what precise changes the law will introduce.
by John McCarthy Consulting Ltd. | Apr 12, 2016 | News
The advent of the new accounting standard FRS 102 for financial periods commencing 1 January 2015 has triggered the need to update engagement letters for both audit and audit exempt companies. Some of the issues that the new engagement letters will need to deal with include:
- the Companies Act, 2014
- allocating responsibility for the decision to apply the ‘undue cost or effort’ exemption for any items in the financial statements and the rationale for so doing;
- financial instruments (including the treatment of long term directors’ and inter-company loans);
- investment properties;
- business combinations including goodwill and the recognition and treatment of intangible assets;
- deferred tax and
- defined benefit pension schemes.
For auditors, the engagement letter will need to clearly spell out what types of advice are permitted and which are not allowed e.g. advice on the implementation of current and proposed accounting standards (e.g. FRS 102) is excluded from the definition of ‘accounting services’ in ES5 ‘Non-audit services provided to audited entities’ [1]. However, auditors will need to take care in providing such services, and guard against giving bookkeeping advice and making specific accounting entries, where these go beyond the technical, mechanical or informative nature.
If you would like complete templates of the different entity engagement letters (and indeed representation letters) they are available at €50 plus VAT each. There is a discount for orders of five or more when the charge is five for the price of four.
Among the types of letter available are
- Standard company audit engagement letter;
- MUD Act company limited by guarantee audit engagement letter;
- MUD Act company limited by guarantee audit representation letter;
- Standard company limited by guarantee audit engagement letter;
- Standard company limited by guarantee audit representation letter;
- Standard company audit representation letter;
- Audit exempt company engagement letter;
- Audit exempt company representation letter.
We can also tailor other letters to order. Please send us an e-mail to john@jmcc.ie with the words ‘engagement letter’ in the subject line.
To hear more about the accounting developments in FRS 102 and for online booking on our upcoming FRS 102 course on Tuesday 19 April in the Camden Court Hotel, Dublin 2, please click the following link FRS 102 – The Journal Entries.
[1} Paragraph 156, ES5 ‘Non-audit services provided to audited entities’ (updated December 2011)
by John McCarthy Consulting Ltd. | Mar 16, 2016 | News
Thirty important issues arising from transition to FRS 102 (new Irish GAAP).
For further training, support and information on the changes, please visit www.jmcc.ie,
call 00 353 86 839 8360 or email john@jmcc.ie
We hope your FRS 102 preparation plans are going well. In order to assist our readers with FRS 102 we have developed a two-part Checklist. Part 1 appears now and Part 2 will be published next week.
Don’t miss our next public course on FRS 102 – great value at €199 for all day course including all materials, tea/coffee and lunch. Here’s a what a recent delegate had to say : ‘I would recommend this course to colleagues as John presents an extremely important topic in an understandable light-hearted fashion with humour.’
For booking details via Eventbrite click here.
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Done?
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A.
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Preparing the firm
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Has the firm developed a training plan for all individuals on the changes to Irish GAAP?
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Does the training plan include changes to Charities, and Pension Schemes templates and does the plan envisage a strategy for the use of the FRSSE 2015?
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Does the training plan also include training on accounting and taxation issues for tax staff?
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Does the training plan include proper use of the firm’s accounts and tax software?
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Is the implementation and effectiveness of the training plan under constant review?
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Has the firm confirmed when its software and reference material will be FRS 102 compliant?
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Has the firm considered the work flow pressures of transitioning client businesses of all types for periods commencing 1/1/15?
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B.
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Reviewing the client base
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8.
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Do any clients have external investors, long term loans or parent companies that will need to be contacted about the move to FRS 102?
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Where clients have loan agreements, have these been reviewed to determine whether FRS 102 might cause a breach of loan covenants or other issues that should be communicated as soon as possible to the clients’ bankers? Are non-bank loan agreements in writing?
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Has the firm discussed with clients what extra fees are expected to be charged in the year of transition to FRS 102, and on an ongoing basis?
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Have the accounting policies applied by each client been reviewed to identify any need to obtain fair value measures, and has this been discussed with the clients concerned?
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Is a plan in place to communicate to charities (and other specialist entities like pension schemes) the changes that are relevant to them?
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C.
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Accounting issues (not a comprehensive list but an indication of key areas)
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Have clients’ financial arrangements been reviewed to ensure no “other” financial instruments exist (which would need to be valued at fair value) under Section 12?
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Do any clients have long term loans at an interest rate below the entity’s market rate of interest (If so this would trigger the need to adjust the loan using the present value at an effective market rate)?
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For investment properties: has the client been warned that movements will now pass through the profit and loss account and attract a deferred tax liability?
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For investment properties let to other group companies: has the client been warned they must be held at a valuation in the individual accounts (and so valuations will be needed at the transitional date, comparative year-end and first year-end under FRS 102)?
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For clients with goodwill in the balance sheet: can the useful economic life of that goodwill be estimated reliably, and if not how will the change be processed?
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Have any clients recently acquired a business since transition date and so might have separate intangibles that must be recognised under FRS 102?
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19.
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Where clients have any assets carried at a valuation, have they been warned that a deferred tax provision will now be necessary?
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For clients with group defined benefit pension plans, has the client been advised that at least one entity in the group must recognise the surplus or deficit?
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Has the firm considered whether clients’ systems will be able to identify the amount of short term employee benefits (untaken holiday pay) that should be accrued at each balance sheet date?
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How John McCarthy Consulting Limited Can Help You
Training Courses
FRS 102 will have a major impact on your financial reporting, auditing and tax work. We’re running a wide range of courses on FRS 102 to help ensure your staff are up to date with the changes in relation to your accounts, audit and tax work.
Contact us for details of in-house courses on FRS 102 brought direct to your office. With an in-house course, we can tackle specific issues relevant to your firm. You and your staff save on travel costs and down time.
- Transition Consulting Service
You provide us with a set of FRS 102 financial statements for the transition year 2014 and we will supply you with a written report containing a commentary with suggested adjustments and changes to accounting policies etc.
- Public Course on Tuesday 19 April 2016
For online booking and more details of our next FRS 102 all day public course at the Camden Court Hotel, Dublin 2 click here.
How John McCarthy Consulting Limited Can Help You
We provide you with an FRS 102 Transition Checklist which helps quickly identify the issues you need to focus on. The Checklist retails for €100 plus VAT and comes with a free template letter to clients explaining the main changes to Irish GAAP and a free document listing the Main Differences Between Old Irish GAAP and FRS 102. Go to www.jmcc.ie for details.
File Reviews
With a file review, we can help ensure your audit teams are complying with the new FRS 102 rules. Our file review feedback time counts as a specifically structured CPD learning session for you and your staff.
We can provide:
- Cold file reviews – we review the file after it has been signed off and provide you with verbal feedback and guidance from our findings. We also provide you with a free written report on the day of your review.
- Hot file reviews – we review the file before it has been signed off, allowing you to make any necessary changes before you sign it off. We provide you with verbal feedback and guidance from our findings. We also provide you with a free written report on the day of your review.
Reviews may consist of a full audit or audit exempt file or the review may be confined to a specific issue on a file.
Reviews may be arranged on-site or we can also conduct postal/electronic reviews, provided we are given sufficient notice.
For details of all our FRS102 services
E-mail john@jmcc.ie or call 086 839 8360
by John McCarthy Consulting Ltd. | Feb 17, 2016 | News
Accounting for investment properties prior to the introduction of FRS 102 was probably a minority sport.
Many companies and groups that don’t’ specialize in renting properties can often have periods when some of their properties are rented out or held for capital appreciation (e.g. construction companies with property stocks that they cannot readily sell). Otherwise these properties would have been dealt with as stocks and work in progress. Because of the recent recession and the fact that some such properties are let out to generate much needed rental income, these properties may now qualify as ‘investment properties’. There are some differences between the old SSAP 19 and FRS 102.
The change in definition of an investment property (dealt with in Section 16 of FRS 102) means that entities holding properties that are not owner-occupied need to review the new requirements carefully.
There are three notable differences in the accounting for investment properties between the old and new Irish GAAP.
1. In the definition itself, old Irish GAAP excluded properties that were occupied by group companies and these had to be treated as tangible fixed assets and depreciated. FRS 102 includes them as investment properties. Therefore, these properties may no longer be depreciated and may be valued at fair value.
2. Although both GAAPs require investment property to be measured at fair value (the old GAAP terminology was different but gave essentially the same measure) the movements were recognised in different places. Under old GAAP gains and losses in value were recognised in reserves (via the Statement of Total Recognised Gains and Losses (‘STRGL’). FRS 102 requires such gains/losses to be shown as part of profit in the profit and loss account.
3. In old GAAP, gains on investment property valuations did not normally trigger deferred taxation, unless there was a binding commitment to sell, which would not usually exist at the time the valuation was conducted. In FRS 102, section 19, deferred tax must be provided on all gains and in the case of investment property, the deferred tax will appear in the profit and loss account as part of the taxation charge for the year.
The new approach means that when there are losses, there is no longer any need to apportion the loss to previously reported gains. However, reported profits will be directly impacted by the new approach. The impact may not always be positive.
On transition, loan covenants may need to be reviewed and new arrangements made with lenders, if property borrowers are not to be found in breach of covenant. These breaches could trigger demands for loan repayment, so preparation is key.
FRS 102 Transition Service
Please ask us about our bespoke FRS 102 Transition Service where we will examine client accounts before/after transition and give you a tailored report explaining the issues arising and whether the transition has been successful or not. To enquire just send an e-mail to john@jmcc.ie
Transition Checklist
We provide you with an FRS 102 Transition Checklist which helps quickly identify the issues you need to focus on. The Checklist retails for €100 + VAT and comes complete with:
- a free template letter to clients explaining the main changes to Irish GAAP and
- a free document listing the Main Differences Between Old Irish GAAP and FRS 102.
Go to http://bit.ly/20XUf7Q for details.
