FRS 102: One year on

01 February 2017

01 February 2017 by MHA MacIntyre Hudson

The long trailed implementation of FRS 102 finally applied to college accounts for the year ended 31 July 2016, with corresponding amendments required for the year ended 31 July 2015.

Experiences were mixed. We have not come across any colleges that changed from the traditional accruals method to account for capital grants. Although we have not surveyed the whole sector, any other approach must be rare indeed.

There was some research required for colleges that had received grants from non-government sources. These had to be treated as though credited to income at the time of receipt. While an initial boost to reserves might have been welcome, the loss of an ongoing credit to income as these grants were released over time certainly was not.

For many colleges the main challenge was calculating the holiday pay accrual, particularly recovering the information for the transition date of 1 August 2014. Of course, the year end falling just before a significant part of the holiday period was not helpful (academies whose default year end is 31 August did not suffer to the same degree), but some colleges found it difficult to extract the raw data to enable the calculation to be undertaken.

Some colleges took the opportunity to reset their holiday year to coincide with 31 July – an approach worth considering as it leaves only the effect of days that can be carried forward from one year to the next to consider.

A final point was the effect on bank covenants. Most colleges sought an early conversation with their bankers to clarify their approach. The effect on the assessment of covenants still appears unclear in some cases and colleges would be well advised to confirm their bank’s understanding coincides with theirs.

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