What will the impact be? The section also includes accounting requirements for VAT and similar taxes which are not based on income, although the … Assets within the ‘new’ intangible fixed assets (IFAs) regime are those treated as intangible assets for accounting purposes. For acquisitions since 1 January 2014 (assuming a 31 December year-end), review the acquisition accounting required under FRS 102 and assess the goodwill and deferred tax adjustments required. Tax on profit on ordinary activities 8 xxxx xxxx ... Intangible assets 10 xxxx xxxx Tangible assets 11 xxxx xxxx Investments 12 xxxx xxxx xxxx xxxx Current assets Stocks 13 xxxx xxxx ... * FRS 102 has adopted a variety of terminology from IFRS (such as property, plant A company which previously discounted deferred tax will see an increase in the deferred tax charge, as FRS On transition to FRS 102, you will have to recognise the deferred tax liability in respect of any past rolled over gains. It will impact the recognition of goodwill, intangible assets, deferred tax, valuation of investment properties and financial instruments, to name just a few. FRS 102 Section 1A. Under Section 18, the residual value is assumed to be zero whereas under old GAAP a residual value could be assigned if it could be measured reliably with the exception of goodwill which was considered to be nil. Deferred tax being increased for all property revaluations including investment properties Under FRS 102 deferred tax must now be provided on all revaluations of property. Intangible assets. They may, however, be adopted for periods commencing on or after 1 January 2015. We’ve created a new compliance pack for small limited companies reporting under FRS 102 Section 1A which is relevant for periods beginning on or after 1 … FRS 102 offers several options to establish the value at which intangible assets already recognised at the point of transition to FRS 102 can be brought into the new reporting regime. Under FRS 102 companies now specifically need to account for holiday pay accruals. Where assets have been revalued, FRS 102 requires that deferred tax is recognised on all timing differences. This will reduce your distributable reserves and could impact on your ability to pay dividends or meet your banking covenants. FRS 10 deals with both goodwill and intangible assets. An intangible asset can be shown at the original cost, at fair value as deemed cost or at the most recent revaluation amount before transition, if such a revaluation is possible. Deferred tax assets are recognised only to the extent that recovery is probable. This exception contained in FRS 19 is now outlawed by paragraph 29.15 in FRS 102 which now requires deferred tax in respect of a non-depreciable property whose value is measured using the revaluation model to be measured using the tax rates and allowances that apply to the sale of the asset. Care must be taken where deferred tax assets are concerned because Section 29 of FRS 102 takes a pessimistic approach to deferred tax assets (as did FRS 19 Deferred tax and the FRSSE). FRS 102: (a) Permits early adoption of FRS 102, provided that the revised regulations are also early Under the previous version of FRS 102, intangible assets need to be recognised if they arise from legal or contractual rights, or are separable (i.e. ... FRS 102 requires deferred tax to be recognised on the fair value movement. The amount attributed to goodwill shall be adjusted by the amount of deferred tax recognised. Under current UK GAAP, deferred tax was only recognised on revalued property if it was intended to be sold. A comparison of the recognition treatment of intangibles and goodwill between old UK GAAP and FRS 102, including the potential tax impact of the new standard. Top Ten Hit Parade of FRS 102 Issues 4. Organisation of FRS 102 (vi) FRS 102 is organised by topic with each topic presented in a separate numbered section. Introduction. There are no fundamental changes to the recognition of intangibles, but the definitions for recognition and measurement have been revised. The section in FRS 102 on intangible assets, other than goodwill, replaces FRS 10 and SSAP 13. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland is now tightening its grip on small companies that are mandatorily required to prepare their financial statements under the standard for accounting periods starting on or after 1 January 2016 (i.e. Consider whether work-loads can be reduced given the new requirement for impairment reviews to only be performed once impairment indicators exists. Previously under FRS 19, no deferred tax was recognised on revalued assets unless there was a binding commitment to sell. This section covers: • the recoverability of deferred tax assets where taxable temporary differences are available • the length of ‘lookout periods’ for assessing the recoverability of deferred tax assets • the recognition of deferred tax assets … 102 for financial institutions. Our technical team at ONF are ready to guide you through the transition to FRS 102. However FRS 102 requires a deferred tax provision to be recognised on investment property that is measured at fair value irrespective of whether the entity is likely to sell the asset and rollover any relief. The deferred tax on the pension scheme should be shown separately within deferred tax and not netted against the pension scheme liability as it would have been under old GAAP. Under old GAAP, website development costs were classed as property, plant and equipment whereas under FRS 102 they will now be classed as intangible assets. capable of being sold separately from the remainder of the business). There are no significant differences between Section 21 of FRS 102 and FRS 12. Revalued assets will therefore now require deferred tax to be recognised on any revaluation gains or losses. Both FRS 102 for small companies and the company law changes are mandatory for periods commencing on or after 1 January 2016 (one year later than for FRS 102 itself). FRS 102 offers several options to establish the value at which intangible assets already recognised at the point of transition to FRS 102 can be brought into the new reporting regime. Section 27 makes it clear that impairment losses should be recognised in the profit and loss account unless it relates to a revalued asset, in which case it will go to the revaluation reserve first. Previously the argument would have been that there was no need to provide deferred tax as there was no intention to sell those properties. (viii) This edition of FRS 102 issued in March 2018 updates the edition of FRS 102 issued in In the Balance Sheet, a Deferred Tax liability is required to be presented within ‘provisions for liabilities’ and a Deferred Tax asset to be presented within ‘debtors’. WATCH FOR DEFERRED TAX TRAPS WITH FRS 102 Published on June 29, 2017 June 29, 2017 • 13 Likes • 4 Comments FRS102 Does deferred tax need to be recognised on intangible assets ,say a customer listing after acquistion? Revalued assets will therefore now require deferred tax to be recognised on any revaluation gains or losses. Both FRS 102 and IAS 38 define an intangible asset as an identifiable non-monetary asset without physical substance. That all changes under FRS 102 as deferred tax is automatically provided for on all revaluation gains. The FRSSE deals with them in the same section. In the old UK GAAP (FRS 10) intangible assets are defined as ‘Non-financial fixed assets that do not have physical substance but are identifiable and are controlled by the entity through custody or legal rights’.’ Revalued assets: FRS 102 requires that deferred tax be recognised on all timing di#erences whether arising in pro"t or loss, other comprehensive income, or equity. Under new UK GAAP, businesses are required to recognise deferred tax on temporary differences that have arisen as a result of business combinations (with the usual requirements to consider recoverability before recognising deferred tax assets). Similarly, a deferred tax asset (liability) shall be recognised for the additional tax that will be avoided (paid) because of a difference between the value at which a liability is recognised and the amount that will be assessed for tax. 2. Section 28 does not provide a timeline in which a comprehensive valuation has to be performed, instead if the underlying assumptions have not changed significantly, then adjusting employee demographics may be sufficient. So its important that business owners, managers and shareholders are aware of the changes well in advance! Employee benefits FRS 102 anticipates the change in IAS 19 to calculate interest and return on assets as a net amount by applying the discount rate to the net pension ‘Expected return on assets’ will no longer apply. FRS 102's definition of an intangible asset is now more in line with IFRS and expands on what is defined as an intangible asset in comparison to the old UK GAAP. At UHY FDW our dedicated tax team aims to minimise your tax exposures and deliver the best advice for your situation. Where could I find more information and guidanc [FRS 102.29.11] In particular, it will be easier to recognise internally generated intangible assets. FRS 102 requires disclosure of estimates relating to the amount of net reversals of deferred tax assets and liabilities expected to occur during the following accounting period. However, only assets created or … Deferred Tax You will need to recognise deferred tax on all timing differences in future. FRS 19 prohibits the recognition of deferred tax on timing differences when fixed assets are revalued unless there is a commitment to sell that fixed asset. Deferred Tax; Goodwill and intangible assets; These changes , and others, will have an impact on financial statements, and could well impact reported profit and retained profit. This will include revaluations or other fair value adjustments to fixed assets, including investment properties. Deferred Tax Deferred tax is now required to be recognised on the revaluation of assets, including goodwill, intangible assets, and fair value adjustments on acquisition. The differing treatment needs to be considered on a case by case basis. In contrast under FRS 11 the impairment loss was set against intangibles first and then finally against other assets on a pro-rata basis. More intangible assets will be recognised that were previously subsumed into goodwill. (vii) Terms deﬁned in the Glossary are in bold type the ﬁrst time they appear in each section, and sub-section within Section 34. Section 29, which covers income tax under FRS 102, contains no grandfathering provisions. An intangible asset can be shown at the original cost, at fair value as deemed cost or at the most recent revaluation amount before transition, if such a revaluation is possible. Investment property revaluations require deferred tax; Under old UK GAAP, deferred tax was only provided on revaluations of investment property and investments where there was a binding commitment to sell the asset at the year end. FRS 102, s 29 sets out the recognition, measurement, presentation and disclosure requirements for both current and deferred tax. Example of a Deferred Tax calculation: 1 April 20X8: Entity XYZ acquires an investment property for £22,000,000.