What motoring companies need to know about the new accounting rulebook

All motor and transport companies will be affected by a new accounting rulebook which came into force in December 2015.

The changes will impact the format of, and disclosures in, financial statements but could also significantly affect your reported profits, tax charges and distributable reserves.

This new rulebook is called FRS102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. The thinking behind FRS102 is to align accounting practice across the globe but more explicitly within Europe, the idea being that standardisation would make international trading easier and more transparent.

Opportunities

Under FRS102 the default life for goodwill in accounts has reduced from 20 years to 5 years so greater tax relief may arise in the nearer future in certain circumstances.

Threats

These changes within the accounts may make it harder to comply with banking covenants on borrowing so we would encourage you to discuss the implications of FRS102 with your bank at an early stage to avoid any unpleasant surprises.