It is expected that the Financial Reporting Council will issue the final version of the new Financial Reporting Standard (FRS 102) early in 2013. It will apply to all accounting periods beginning on or after 1 January 2015. However, as comparative figures have to be restated the first relevant date for most RSLs will be 1 April 2014 (i.e. the opening comparative balances).
The new FRS isn’t just an amendment to current accounting standards. It is a whole new accounting framework. All existing accounting standards and guidance are being scrapped and replaced with a single standard based largely on International Accounting Standards. So far the focus has been on the big issues that face the sector (e.g. accounting for pensions and grants) – but the new standard will result in a number of other changes.
We at Alexander Sloan have taken a set of existing RSL accounts and re-prepared them using the draft FRS. The results of this exercise are speculative in part in that the precise requirements will be determined by a future SORP. However, as the SORP will be designed to interpret the FRS the results should be reasonably accurate.
From a financial point of view there are not many changes to figures, with the introduction of a liability for the contributions to the past service deficit on the SHAP Scheme being the most significant change. However, there are a number of changes in disclosure requirements in the FRS – some of these changes will result in reduced disclosure and other will result in new, or more detailed disclosure.
For example, the draft FRS’s requirements for a cash flow statement are more simplified than is currently required. There are less disclosure notes on cash flow and only three categories of cash flow (operating, investing and financing).
In other areas the FRS will result in additional disclosure – for example, paragraph 17.32 states:
The entity shall also disclose the following:
(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.
(b) the amount of contractual commitments for the acquisition of property, plant and equipment.
This would mean that an RSL would have to disclose the net book value of those houses that lenders hold a security over. This may be easier said than done and it would be surprising if a future SORP did not adopt this requirement, as it’s certainly applicable to housing associations.
We will be hosting our annual RSL Seminar in Glasgow (4th Feb) and Edinburgh (5th Feb). We will be covering the impact of the new FRS, concentrating on the practical problems it will present rather than just the technical side. This will include a look at how RSL accounts will look in the future.
We will be joined by Andrea Paterson and Bill Truin of IS4 Housing & Regeneration, who recently updated the Scottish Housing Regulator’s guidance on Business Planning and Asset Management and will be giving pointers on this guidancee.
Bill Saunders of Central VAT services will also there to give some practical examples in applying the cost sharing exemption.
We hope to get a flyer for the seminar out before Christmas, but if you are interested please feel free to get in touch.