Highlighting Impact of ‘New UK GAAP’

Update from Nair & Co. International Accounting Services Team

(Bristol, UK) - The UK has introduced Financial Reporting Standard (FRS) 102, a new reporting standard. The new standard will apply to all business entities based in UK which do not follow International Financial Reporting Standards (IFRS)or the FRS 101, expect small entities. It will be effective for accounting periods beginning on or after 1 January 2015, however, prior period comparatives may also require restatement. Accounting changes required in FRS 102 may impact corporation tax calculations, however the significance may vary depending on the size of the entity, with larger entities taking on more of a burden, says Nair & Co.’s International Accounting Services Team. The following areas may be impacted: Taxation – Current  Intercompany balances: Where balances exceed one year, the balances must be carried forward at fair value. The fair value may be less than the loan principal when the balance is not on commercial terms, fair value adjustments may be charged to the profit and loss account. Companies should take into consideration the tax treatment of transfer pricing under the new standard. Software costs: Software costs that meet certain criteria may be reclassified as intangible assets, resulting in accelerated tax deductions. This relief may be claimed as amortisation rather than capital allowances. Financial instruments: The new standard may result in an increased number of fair value adjustments which may result in an increase in applicable taxes.

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Taxation- Deferred  Investment properties and non-depreciated assets: Investment properties and non-depreciated assets must be carried forward at fair value, this may increase deferred tax liabilities in the case the fair value is more than cost of the tax base. IFRS approach may be applicable to business combination accounting. The new process may require the valuation of intangible assets at fair value. Therefore the increase in the fair value more than the tax base may result in deferred tax liabilities.

This new standard represents a significant change from existing GAAP. It advised that companies undertake an impact analysis and ensure that any effects on corporate taxes are considered and transitional changes are made. For more information about doing business overseas or to know more about our International Expansion Services team please contact Nair & Co.. Subscribe to regular global tax compliance alerts from Nair & Co.

International Business Guide (IBG) is our online platform for companies wishing to optimize their multinational operations and would like to have specific business information for doing business in a particular country - Click Here. Get the latest news releases and updates on international tax, HR, Finance, compliance and other legal news at Nair & Co. Industry Alerts. About Nair & Co. Nair & Co., the leader in international business expansion services, provides accounting, HR, legal, tax and compliance services for the set up and management of your international operations. Our model of a single-pointof-contact, supported by internal teams of experienced advisors, helps clients expand business and manage risk so they can focus on their core business and sustain growth with minimal risk, stress and cost. We support nearly 250 clients in over 70 countries. Nair & Co. is headquartered in Bristol, UK, has 450 employees and offices in China, India, Japan, Singapore, and the US. Learn more at www.nair-co.com Media Contacts For media enquiries or to learn to more about Nair & Co., please email us at media@nair-co.com or call Yvonne Smith at +1.408.501.8867

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