FRS 102 introduces new accounting standards for UK businesses that will impact HR departments. It requires companies to calculate accrued employee benefits like unused holiday pay and provide this information to finance. HR must also report data on employee headcounts, termination benefits and other long-term employee costs. The standard provides more guidance around classifying and quantifying employee costs for financial reporting.

1. 1
Presentations by
Antony Federer FCCA, ACA, CF
Audit Partner at Rayner Essex LLP
And
David Richter, Marketing Manager
from Octopus

2. 2
The New Accounting Standard
for UK Businesses and
The Reporting Requirements for
HR Departments

3. 3
Outline of FRS 102 and Employee
Benefits
• Changes in accounting regulations in the
UK
• What is FRS 102
• How does it impact your company
• Specific provisions that impact HR

4. 4
Changes in accounting standards
• Accounts in the UK are prepared under accounting standards
called UK GAAP
• GAAP stands for Generally Accepted Accounting Practice
• Changes for accounting periods commencing on or after
- 1st January 2015 for medium and large companies
- 1st January 2016 for small companies
• FRS 102 is applicable to medium and large companies from
1st January 2015 and small companies from 1st January 2016
• This will replace all existing accounting standards

5. 5
Company size criteria
Turnover Gross Assets Average no. of employees
Micro-entity Not more than
£632,000
Not more than
£316,000
Not more than
10
Small company Not more than
£10.2 million
Not more than
£5.1 million
Not more than
50
Medium company Not more than
£36 million
Not more than
£18 million
Not more than
250
Satisfy Two out of the Three criteria to qualify

6. 6
Which accounting standards?
IFRS
FRS 101
FRS 102
FRS 102 – reduced disclosure
FRS 105 – Micro Entities
Certain large companies
Groups adopting IFRS
Large and medium companies
Small companies
Micro companies

7. 7
What is FRS 102
Prescribes how
accounts are
prepared
Shows what
accounts disclosures
are required
Single standard with
35 sections
335 pages!!!
FRS 102

8. 8
Sections most relevant to HR
• Section 28 – Employee benefits
• Section 35 – Transition to FRS 102

9. 9
Section 28 – Employee benefits
Definition:
All forms of consideration given by an entity
in exchange for services rendered by
employees, including Directors and
Management.

10. 10
Section 28 – Employee benefits
There are 4 type of employee benefit:
• Short term employee benefits
• Post employment benefits
• Other long term employee benefits
• Termination benefits

11. 11
Section 28 – Employee benefits
Short term employee benefits
“Employee benefits (other than termination benefits) that
are expected to be settled wholly before twelve months
after the end of the reporting period in which the employees
render the related services”
a) Wages, salaries and social security contributions;
b) Paid annual leave and paid sick leave;
c) Profit-sharing and bonuses; and
d) Non-monetary benefits (such as medical care, housing,
cars for current employees)

12. 12
Section 28 – Employee benefits
Short term employee benefits
• You will need to calculate the unused / accrued holiday
and any sick pay that has not been paid for all staff at
the year end date to provide to your Finance Department
• Two questions to think about:
1) Is the year end of your company coterminous with
the company’s holiday year?
2) Are employees able to carry forward unused holiday
not taken during the holiday year?

13. 13
Section 28 – Employee benefits
Short term employee benefits
• If you answered “Yes” to question 1 (coterminous year end)
then there may be little for you to do!!!!
 If employees cannot carry forward any unused holiday
then there is nothing to calculate and nothing to report
 If employees can carry forward unused holiday pay then
you will need to calculate the value of this and provide it to
your Finance department

14. 14
Section 28 – Employee benefits
Short term employee benefits
• If you answered “No” to question 1:
 You will need to calculate the value of any unused holiday
at the year end date and provide it to your Finance
department
 Please note - If an employee has taken too much holiday
the negative figure should be off set against the unused
calculation

15. 15
Section 28 – Employee benefits
Post employment benefits
“Employee benefits (other than termination benefits and short
term employee benefits) that are payable after the completion of
employment”
= retirement benefits, such as pensions; and
= post-employment life insurance / medical care
This is a complex area and therefore if you believe you have any
of these please liaise with your Finance Department so that they
can seek advice accordingly

16. 16
Section 28 – Employee benefits
Other long term employee benefits
“All employee benefits, other than short-term employee benefits,
post-termination benefits and termination benefits, if not
expected to be settled wholly before 12 months after the end of
the year end in which the employees render the related service”
= long-term paid absence (ie long-service or sabbatical leave)
= long-term disability benefits
= profit-sharing and bonuses
= deferred remuneration
You will need to inform your Finance Department of any staff
member falling into any of the above categories

17. 17
Section 28 – Employee benefits
Termination benefits
“Employee benefits provided in exchange for termination of
an employee’s employment as a result of either:
a) An entity’s decision to terminate an employee’s
employment before the normal retirement date; or
b) An employee’s decision to accept voluntary redundancy
in exchange for those benefits.”

18. 18
Section 28 – Employee benefits
Termination benefits
• If termination takes place during the accounting year with
payment after the year end date – then this information will
need to be provided to the Finance department
 A company may be committed to make payments to
employees when it terminates their employment:
- by legislation, contractual agreements, or other agreements
 Recognition – immediately as there is no future economic
benefit to the company

19. 19
Section 35 – Transition to FRS 102
What you will need to know to assist your Finance Team
• the year end of your company
• the first year in which the company will adopt FRS 102
• the transition date
(being the first day of the year preceding the year of
adoption i.e. if the year end is 31 Dec 15 the transition
date is 1st January 2014)

20. 20
Section 35 – Transition to FRS 102
What you will need to DO to assist your Finance Team
• Calculate the holiday pay provision:
- at the date of transition
- at the end of the comparative year
- at the end of the year being reported on
• Calculate any termination payments to be paid after the
year end date

21. 21
Section 35 – Transition to FRS 102
Examples of dates
- the date of transition
- at the end of the comparative year
- at the end of the year being reported on
Year ended
31 December 2015
1 January 2014
31 December 2015
31 December 2014

22. 22
And Finally - Other reporting requirements
Average number of employees
 For small companies – total only (this is new!)
 For medium and large companies – split between each
category (ie management, administration, manufacturing
etc)
 The calculation is the average number of all employees
– irrespective if they are part time (every head counts
as 1)

23. 23
Summary
• This has been a brief introduction to the impact
of FRS102 on the HR Department
• The major change for most companies will be
the requirement to make holiday pay accruals
• The accurate quantification and gathering of this
data will be time consuming
• Octopus Software can assist with this process
and David will now demonstrate how this can be
done