UK GAAP – What is the UK GAAP?
The UK GAAP, short for the Generally Accepted Accounting Practice in the UK, is a regulatory body that establishes how accounts and financial reports should be prepared in the United Kingdom.
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The UK GAAP does not apply to all UK companies. According to EU law, listed companies – that is, companies whose shares are listed on a stock exchange for public trading – must follow the IRFS Standards instead. Non-listed companies can choose whether to follow the IRFSs or the UK GAAP.
New UK GAAP
In 2015, the UK’s Financial Reporting Council (FRC) published a set of new reporting standards collectively known as the New UK GAAP. These new standards applied to all accounting periods starting on or after January 1st 2016.
The introduction of the New UK GAAP aimed to make financial reporting both easier and cheaper, whilst creating a more unified, coherent and succinct set of standards.Compared to the old standards, the New UK GAAP:
- Expands it’s definition of a ‘financial institution’;
- Enables more organisations to apply for the UK GAAP, including a wider range of SMEs and micro-businesses;
- Creates new rules for some certain assets and sources of income, including biological assets and government grants;
- Assumes all intangible assets have finite lives and must be amortised.
UK GAAP for micro-entities
Under the New UK GAAP, a simpler accounting standard has been developed for ‘micro-entities’. To be classified as a micro-entity, a company must meet at least two of the following requirements:
- An annual turnover of less than £632,000.
- A balance sheet total of less than £316,000.
- No more than 10 employees.
In 2016, the micro-entities regime was extended to include qualifying partnerships but some organisations, such as charities, still cannot qualify as micro-entities. The micro-entities standard is optional, and qualifying companies can follow the rules for larger organisations if they choose to do so.
According to this standard, micro-entities:
- Can produce a more simple balance sheet and profit & loss account;
- Are exempt from having to produce a directors' report;
- Are required to include less information and notes on their accounts – this is know as ‘minimum accounting items’;
- Do not need to file their profit and loss account Companies House, only their balance sheet.
UK GAAP and Debitoor
Do you qualify as a micro-entity? With Debitoor invoicing software you can send invoices, track expenses, and produce financial reports in a matter of seconds. With Profit and Loss reports, VAT reports and Balance Sheets, Debitoor gives you the tools you need to manage your accounts and financial reporting.