UK GAAP (Generally Accepted Accounting Practice) is the set of accounting standards and practices applicable to UK companies not using IFRS. The primary standard is FRS 102, which sets the rules for recognition, measurement, and disclosure of financial information in the annual accounts of UK entities.
In Depth
UK GAAP, centred on FRS 102, is the accounting framework used by the vast majority of UK companies — private limited companies, LLPs, and charities that are not required to use IFRS.
FRS 102 was introduced in 2015, replacing the previous suite of UK accounting standards (SSAPs and old FRSs). It is based on the IFRS for SMEs with modifications for UK-specific requirements and was designed to modernise UK financial reporting while maintaining proportionality for smaller entities.
Key differences between FRS 102 and IFRS that affect FP&A teams include: leases (FRS 102 retains the operating/finance lease distinction; IFRS 16 puts all leases on balance sheet), goodwill (FRS 102 requires amortisation over its useful life; IFRS tests for impairment annually), development costs (FRS 102 Section 18 has specific capitalisation criteria), and financial instruments (FRS 102 Sections 11/12 are simpler than IFRS 9).
FP&A teams working under UK GAAP should understand these standards because they determine how actuals are reported. The management reporting structure should align with FRS 102 categories to enable efficient reconciliation between management accounts and statutory accounts.
For UK private companies, FRS 102 provides a simpler, more cost-effective reporting framework than IFRS while still producing decision-useful financial statements. Companies considering a future listing should plan their transition to IFRS well in advance.
Real-World Example
A UK private company's FP&A team prepares annual accounts under FRS 102. Key accounting judgements include: capitalising £600K of development costs under Section 18 (meeting the technical feasibility criteria), amortising goodwill from a prior acquisition over 8 years (Section 19), classifying £200K of office leases as operating leases (Section 20), and recognising revenue from long-term contracts on a percentage-of-completion basis (Section 23).
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