Accounting comes under a lot of scrutiny, and companies in the UK are required to prepare their books and financial statements using either UK GAAP or international accounting standards. However, complying with such comprehensive standards can be difficult. Therefore, companies work with chartered accounting firms to help them with their accountancy needs.
UK GAAP is the body responsible for establishing the standards required by companies to prepare their accounts in the country. Moreover, businesses in the UK also need to comply with the Companies Act of 2006 when maintaining their accounts and preparing financial statements.
It is always advised to work with an accountant who can help you with your complex accounting and taxation needs. Doing it yourself can backfire, especially if you don’t have the necessary knowledge and experience in dealing with the various standards. Let’s have a detailed look at the various accounting standards in the UK.
The Financial Reporting Council (FRC) has replaced the old UK GAAP to make it more consistent with modern needs and requirements. The new rules have streamlined the entire reporting process. The FRC has also introduced a new disclosure (FRS 101) which sets up a framework of reporting for parent entities and subsidiaries that provide publicly available financial statements.
You may be surprised to learn that the old UK GAAP rule book was 2,500 pages! It comprised all the changes made during the years. The changes have brought the UK GAAP closer to the International Financial Reporting Standards (IFRS). However, it still lacked basic operational principles for effectivity. The FRC stepped in to provide pragmatic and practical solutions to help solve the operational problems of applying these standards to actual practice. The changes have proven cost-effective, and companies find it much easier to adhere to modern rules and principles.
FRS 100 – Financial Reporting Requirements
FRS 100 details the standard of the financial reporting framework for companies who are required to prepare their financial statement according to the relevant legislation and accounting standards applicable in the UK. The FRS 100, FRS 102 and FRS 103 come under the FRS 100. It’s important to note that companies can only move between accounting frameworks once every 5 years. This means you can’t switch from UK GAAP to IFRS or vice versa every year.
FRS 102 – Financial Reporting Standard Applicable in the UK and Republic of Ireland
FRS 102 was one of the new standards introduced by the FRC. The standard was introduced to help the users of accounts receive informative financial reporting, which depends on the entity’s complexity and the user’s needs.
Introducing this new rule will have significant implications on the financial statements of companies that adhere to the UK GAAP. In addition to format changes and disclosers, there have been significant changes to how assets and liabilities are recognised. The measurement criteria of certain accounting items have changed as well. The FRS 102 has also changed the treatment of certain gains or losses.
One of the most significant changes was the impact on a company’s tax. Businesses can legally reduce their tax bill in several new ways. Changes in lease incentives, recognition of separate intangible assets and the reclassification of software as intangible fixed assets will allow companies to obtain certain tax deductions that reduce the amount of money they’ll need to pay to HMRC.
FRS 102 divides the financial instruments into separate categories. Basic accounts such as creditors and debtors are stated at amortised costs. There is no discounting for short-term items, and they will be listed at the expected amount to be paid.
FRS 103 – Insurance Contracts
The FRS 103 is related to insurance contracts and aims to clarify the amounts in an insurer’s financial statements arising from such contracts. The standards mention identifying and recognising such amounts and relate to the financial strength of companies with long-term insurance contracts. The standard was adopted to help users of financial statements understand the complexities of the amount and future cash flows from these contracts.
Benefits of Having Accounting Standards
Businesses may question the efficacy of having such complex accounting standards because it can be quite challenging to keep up with an ever-changing regulatory environment. However, adopting a particular method of maintaining your books and preparing financial statements has various benefits.
Accounting standards achieve uniformity in accounting. They provide the rules for accounting treatments and recording of the different transactions. Without such uniform standards, businesses cannot report their financial performance to key stakeholders.
Reliability is of utmost importance when creating financial statements. Having robust accounting standards ensures an accurate and fair picture of a company’s financial health. Stakeholders rely on such information to make their investment decisions. Therefore, it is essential to have standards that ensure the reliability of such statements and helps investors make informed decisions.
Another essential benefit of having accounting standards is they help prevent fraud and manipulation. They lay down the principles and standards for companies to follow, and such uniformity helps prevent instances of fraud and deceit. The company’s management can’t engage in deceitful practices and manipulation to overstate or understate their financial statements.
Accounting standards also help auditors assess financial statements and give their opinions. These rules, regulations and standards are written, and the policies are expected to be followed by companies. Auditors can check whether these standards have been followed and make the necessary judgements to check the impartiality and fairness of these statements.
Accounting standards also make comparing two sets of financial statements much more straightforward. Since all entities in the UK are required to follow the UK GAAP or IFRS, there is uniformity in creating financial statements. This helps statisticians and other government officials gauge the financial health of industries, providing insight into the growth of the country.
These standards also help determine managerial accountability. Stakeholders can assess the management’s ability to improve profitability, maintain solvency and other financial aspects of the company. The executive management is under close watch as any material, or frequent changes in accounting policies can raise alarm bells. A consistent accounting policy is crucial to maintaining the reliability of financial statements.
Why Hire an Accountant
Accounting standards can be quite complex to decode. Any misunderstandings can be detrimental to the financial health of your company. It’s wise to work with a chartered accountant who can help you create financial statements according to the frameworks and regulations.
These experts can help you choose an accounting policy that benefits your business. They will bring the consistency and reliability required to ensure your financial statements are unbiased and free from error. A competent, qualified, and experienced accountant is a valuable asset for your business. They will use their skills, experience and knowledge of the relevant standards to build a robust accounting environment within your company.
Chartered accountants and business advisors can assist you with corporate strategy, taxation, risk reduction and other critical financial matters of your business. They will represent your interests and ensure that your company adheres to relevant laws and standards. Their profession owes a duty to the public as they ensure organisations act ethically.
Credibility is key for accountants, who do everything possible to ensure the legitimacy and reliability of the financial decisions undertaken by the business. Accountants ensure the data coming out of financial statements is reliable because it builds public trust and value for the business.
Accountants are constantly challenged to demonstrate their ability to adapt to an ever-changing regulatory landscape. Public expectations are high, and accountants need to have both flexibility and robustness to uphold the accounting standards.
If you’re struggling with quality business advice on growing and sustaining your business, it is time to get the help of chartered accountants and business advisors in the UK. These professionals will bring unprecedented experience and expertise that can help elevate your business to new heights. They will gauge the existing financial side of your business and recommend ways to improve processes or help grow them to the next level. Hiring an accountant or adviser will put you on a growth trajectory.
Owning a small business is pretty hands-on. You’ll be heavily involved in the business’s daily operations, and you might not get time to handle your finances appropriately. Hiring an external accountant will save you a lot of time. They will handle all the legwork and deal with the HMRC on your behalf. They will adhere to all deadlines and ensure you understand all the complex tax regulations.
When you hand over these duties to an external accountant, it can free valuable time to dedicate to other aspects of your business. You can plan to expand your business, grow your team, and look for ways to improve your product or service.
There’s no substitute for experience, and an expert external accountant will bring an unmatched level of experience and expertise to elevate your business to new heights. If you have a complicated accounting and tax structure, you’d need an expert to handle the financial side of things. An expert accountant will ensure that your business complies with all financial regulations, act as your representative to the HMRC, and ensure that everything is running smoothly.
Another top benefit of hiring an external accountant is that they will help you save money. First, you don’t have to worry about hiring an in-house accountant or a full-time employee, paying them massive salaries and other monetary perks. An external accountant will only demand payment for their services during a specific time. This can vary depending on the type and size of your business.
A chartered tax adviser and accountant will also help you find legal ways to reduce your tax bill. It’s worth investing in the services of an external accountant as they will be motivated and driven. They will go above and beyond in taking your business to the next level.
Why Work with IBISS & CO
Working with a reliable accountant who will uphold the standards and help you comply with the various rules and regulations is essential. If you operate a business with a complicated tax structure, never hire inexperienced accountants. A qualified chartered accountant will bring unprecedented expertise and quality that will elevate your business to new heights.
If you’re looking for a professional accountant, then you can’t look past the services provided by IBISS & CO. They have some of the best chartered tax advisers & accountants who will go above and beyond in helping you with your accounting needs. They’re qualified professionals with a no-nonsense approach. Their extensive knowledge of the various accounting standards will ensure that your business operates smoothly. They will also help you create an accounting policy that aligns with your business goals and expectations.
Their team of expert chartered accountants and business advisors in the UK have worked with some of the biggest businesses in the country and has given them the exposure and experience to handle complex financial, accounting and taxation matters. They uphold the law and are committed to providing reliable public representations. Their goal is to provide the business community with quality accounting services.
They’ve also recently opened up our office in Walsall and are all set to help the community with their expert accountancy and taxation advice. Whether you’re looking for self-assessment tax returns, rental income taxation, RTI, payroll or any other issues, they’re here to help you in every way. They’re looking to become your go-to tax and accounting consultants! Contact them today for more information.