technology
UK GAAP is changing
Jason Mitchell, partner at MHA MacIntyre Hudson in Reading, highlights how those changes will be relevant to technology sector businesses in particular
On March 14 the FRC published FRS 102 – The Financial Reporting Standard applicable in the UK and Ireland. The revised accounting standard will apply to all medium and large entity financial statements for accounting periods commencing on or after January 1, 2015. The FRS is based on IFRSs but allows some accounting policy options that exist under current UK GAAP.
“At first glance at the rules, these changes may not look significant, but like all changes to accounting standards, it is always the devil in the detail”, Mitchell comments.
Financial instruments
Fund raising for technology companies is a key component and can be structured in numerous ways. It’s important to understand what’s most suitable from a commercial perspective and consider how it will be presented in the financial statements. Our experience is that there are many different forms of financial instruments used depending on agreements reached between business operators and funders. Additionally, there will often be an international/currency element which will add to the complexity.
Intangible assets
Intangible assets are particularly prevalent in technology companies. Whether taking the form of capitalised development costs, patent/copyright/IP costs or goodwill arising from acquisitions, it’s important to understand how they should be accounted for and the impact on the balance sheet.
business focus 29
Why do you need a business continuity plan?
You will often hear the phrase 'because it makes good business sense’, writes Shaun Lockwood of URM, but is that enough of a reason for having a business continuity (BC) plan and why does it have to be written down?
Business combinations
Within the sector, company acquisitions and mergers are common. Ideas develop into commercial opportunities and businesses acquire add-ons to their own products and services. It’s important to understand the impact that an acquisition will have on individual and group financial statements from many perspectives.
Leases
It’s also common to see various leases in place with technology companies as a form of funding, as cash is used up on operating activities and development. Under current UK GAAP an operating lease is a form of off-balance-sheet finance, but with the introduction of FRS 102 it’s expected that certain leases will no longer be classified as operating leases and will need to be shown on the balance sheet.
This is just a flavour of some of the areas affected by FRS 102. Mitchell warns companies should seek professional advice to consider the full implications, particularly if they are planning to present their results to external parties in the near future.
Details: Jason Mitchell 0118-9503895
www.macintyrehudson.co.uk
Businesses, whether they are public, private, voluntary agencies or charities, know the value of having documented and agreed contracts with suppliers ie to ensure they supply what has been agreed, in the appropriate manner and on time.
So what is so different having a BC plan for your company?
A good BC plan will contain step-by-step instructions on how and when to recover the critical parts of your business, to an agreed service level and in a time scale that results in minimal disruption to your customers.
According to the Chartered Management Institute, one in five organisations suffer a major disruption every year. The reasons behind the disruption are varied and unpredictable. As such, an effective BC plan is one which can deal with a wide range of disruptions. And, if you get it right, a well thought through, practical BC plan can mean the difference between surviving and not surviving as a business. Even a short
disruption to normal business operations can affect customer relationships and your reputation.
Why is it best to have a documented plan and not just rely on instinct?
Quite simply, if you rely on instinct and ‘reacting on the spot’, you will miss things and you may not have the right people available at the time to deal with a disruption. The best course of action is to step back now and consider what your key products and services are and the nature of the major risks which threaten your business. You can then document a plan to deal with any ensuing disruption, which includes recovering activities in priority order and ensuring you have the resources trained and available to assist in a recovery at any time.
Want to know more?
URM is one of the UK’s leading BC consultancy and training organisations and if you would like to know how URM can assist you develop your business continuity capabilities, contact us on details below.
Details: 0118-9027450
info@ultimariskmanagement.com
THE BUSINESS MAGAZINE – THAMES VALLEY – NOVEMBER 2013
www.businessmag.co.uk
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