FRS 102

The new balance sheet

With FRS 102 mandatory for accounting periods beginning on or after 1 January 2015, we take a look at how the new balance sheet will work.

Click on the orange arrows to find out how each area has been affected.

Acme Ltd

Consolidated Statement of Financial Position

Statement of Financial Position

The terminology used throughout FRS102 is more in line with IFRS. To comply with UK company law, the primary statement headings will still need to be as per the formats specified, but in other areas, such as the titles of these statements, the terminology of FRS 102 may be used instead.

31st December 2015
Fixed assets
Intangible assets

Intangible assets

FRS 102 requires all intangibles to have a finite useful life, which should not exceed 5 years if it cannot be reliably estimated. This replaces the rebuttable presumption of 20 years under FRS 10. Following business combinations under previous UK GAAP, intangible assets were less likely to be identified separately from goodwill due to the recognition criteria. Under FRS 102, the ability to measure fair value reliably is sufficient for recognition and so additional classes of intangible assets are expected.

40,000 50,000
Tangible assets

Tangible assets

Under FRS102, investment property is required to be revalued annually to fair value, with value movements taken to profit or loss. This is significantly different to SSAP 19, which recognised these gains or losses (based on an open market valuation) in a revaluation reserve, and so there was usually no impact on the entity’s profits. For other tangible assets held at valuation, the strict timeframes of FRS 15 with regards to full/interim valuations are replaced by ‘sufficient regularity’.

45,000 40,000

Investments (fixed assets)

As financial instruments, investments in shares must now be recognised at fair value through profit or loss, unless this cannot be reliably measured. Previously, investments in shares were recognised at either cost or fair value, with fair value movements recognised in the STRGL.

All derivatives are classified as 'other financial instruments' and measured at fair value through profit or loss. They must be recognised on the SOFP under an appropriate format heading.

24,000 24,000
  109,000 114,000
Current Assets


Long term contracts (now 'construction contracts') are no longer included within stocks but are instead accounted for under revenue. Under FRS 102, the contract costs are expensed as incurred, with the percentage completion method being used to recognise the corresponding revenue, resulting in no stocks being recognised for long term contracts.

The cost of stocks must be measured using the FIFO or weighted average method. The use of the LIFO cost method is not permitted by FRS 102.

30,000 25,000


Recognition and disclosure of financial instruments is a key area of change for many. Common balances such as trade debtors, trade creditors, bank balances and investments in ordinary shares are all now classified as basic financial instruments and will hence need to be included in financial instrument disclosures and accounted for accordingly.
It is therefore quite unlikely that a set of accounts under FRS 102 will not contain financial instruments.

10,000 5,000
Cash at bank and in hand

Cash at bank and in hand

There is no exemption from preparing a cash flow statement under FRS 102, although reduced disclosures do exist for qualifying entities. There are key presentational differences from previous UK GAAP as FRS 102 now includes only three categories: cash from operating activities, investing activities and financing activities.
A note is required to reconcile the balance shown here to the balance of cash and cash equivalents recognised in the cash flow statement.

25,000 20,000
  65,000 50,000
Creditors: Amounts falling due within one year

Creditors: Amounts falling due within one year

Classification of leases as finance or operating still relies on the substance over form concept and consideration of the risks and rewards of ownership, but there are slight differences in the finance lease identification guidance between FRS 102 and SSAP 21. In reality it is unlikely the classification will change on transition due to the similarity of the overriding concepts.

10,000 9,000
Net current assets
55,000 41,000
Total assets less current liabilities
164,000 155,000
Creditors: Amounts falling due after more than one year
5,000 8,000


Deferred tax must be recognised on revalued assets under FRS 102, regardless of whether the entity has entered into a binding agreement to sell or not, which was a condition of previous UK GAAP. It must also be recognised on assets and liabilities recognised in business combinations, where the circumstances are met. Discounting of deferred tax balances is prohibited by FRS 102.

5,000 5,000
Accruals and deferred income

Accruals and deferred income

Under FRS102, an accrual for holiday pay is specifically required. This will have the largest impact on companies with non-coterminous financial and holiday years or where employees are allowed to carry forward their allowances to future years.

2,000 1,000
Net assets excluding defined benefit pension plan liability
152,000 141,000
Defined benefit pension plan liability

Defined benefit pension plan liability

FRS 102 reflects FRS 17 accounting for defined benefit pension plans in areas such as the valuation method, discounting of obligations and ability to account for a multi-employer plan as a defined contribution plan under set circumstances.
However, FRS 102 does not require actuarial valuations to be performed at any set intervals nor must they be done by an independent actuary. If assumptions have not changed significantly, the prior period obligation can simply be adjusted for employee changes.

50,000 50,000
Net assets including defined benefit pension plan liability
102,000 91,000
Capital and reserves

Capital and reserves

Entities are now required to present a Statement of Changes in Equity. This is a reconciliation between the carrying amount of each component of equity at the start and end of the period, disclosing separately movements from: profit or loss, other comprehensive income and investments by/distributions to owners.
If the only movements are profit or loss, dividends and restatements of the opening balance, then a Statement of Income and Retained Earnings can be presented instead.

Called up share capital
1,000 1,000
Revaluation reserve

Revaluation reserve

Under previous UK GAAP, most revaluations were recognised in the STRGL and the revaluation reserve. Under FRS 102, new rules applying to investment property and 'other' financial instruments, for example, recognise gains or losses on revaluation through profit or loss. Any existing balance in this reserve for these items will need to be transferred to the profit and loss reserve on transition to FRS 102.

20,000 15,000
Profit and loss account
71,000 67,000
Equity attributable to the owners of the parent company
92,000 83,000
Minority interests

Minority interest

Group accounts must separately disclose any minority interests in subsidiaries, as previously. Where the parent company’s controlling interest changes, but there is no loss of control, this is to be treated as a transaction between equity holders under FRS 102, which means the only impact is in the group reserves. Goodwill should not be recalculated and no gain or loss on the transaction should be recognised, as was previously the case.

10,000 8,000
102,000 91,000