There are a number of significant updates and changes for credit unions in 2016.

For the year ended 30 September 2016 credit unions will be preparing their financial statements under the new Financial Reporting Standard, FRS 102, for the first time.

These changes have given rise to new challenges for the sector as a whole and in particular their financial reporting practices.

This article sets out some practical considerations in adopting these changes.


ADOPTION OF FRS 102
FRS 102 is the new Financial Reporting Standard which replaces existing Irish Generally Accepted Accounting Practice (‘GAAP’) for accounting periods that commence on or after 1 January 2015. For all credit unions in the Republic of Ireland this means that the financial statements for the year commencing on 1 October 2015, and ending on 30 September 2016, will be required to be fully compliant with FRS 102, and therefore reflect the relevant measurement, presentation and disclosure differences. The comparative figures within these financial statements, i.e. year ended 30 September 2015, will also need to be restated in accordance with FRS 102 rules.

The main impact of FRS 102 on the financial statements of credit unions
•    Additional and more detailed accounting policies 
•    If applying Section 11 and 12 of FRS 102, investments need to be categorised as either “Basic” or “Other” in order to determine their accounting treatment under FRS 102.
•    Member’s loans to be measured at amortised cost using the effective Interest method (constant rate of return to carrying amount of loan) and loan interest therefore to be recognised on an accruals basis as opposed to current cash basis 
•    Tangible Assets - Initial measurement of property upon first time adoption of FRS 102
•    Bad Debt Provisions – more justifications required under FRS 102 for carrying general loan provisions
•    Accruals for Holiday Pay entitlements (may or may not be material)   
•    Treatment of ILCU League pension scheme differs under FRS 102 
•    Treatment of uplift or fall in reserves in financial statements at date of transition 1 October 2014. 

What credit unions should do?
•    Identify the date of transition – 01 October 2014
•    Identify the adjustments required at the date of transition
•    Process the adjustments required to the opening balances for 30 September 2015 TB
•    Prepare 30 September 2015 using FRS 102 rules
•    Identify the adjustments required to the opening balances for 30 September 2016 TB
•    Prepare 30 September 2016 TB using FRS 102 rules

Disclosure Changes 
There are numerous disclosure requirements in the financial statements under FRS 102 which credit unions should consider to ensure these are disclosed and presented correctly. Credit unions also fall within the definition of a ‘financial institution’ under FRS 102 meaning added disclosures over and above other entities applying FRS 102.

In addition key management personnel remuneration will now need to be disclosed in the financial statements.

Overall, credit unions should consider the above and implement appropriate financial systems and procedures to ensure compliance with FRS 102.

For more information or assistance please contact Cormac Reilly or Sinéad Keane