Most SME owners understand their profit and loss account and balance sheet, but the Statement of Changes in Equity often goes unread. It reconciles exactly why shareholders' funds moved — through profit, dividends, share issues, or revaluations — and misunderstanding it can lead to illegal dividends, bad lending decisions, or a false sense of business health.
A warehouse bought for £400,000 in 2015 can sit on the books at £300,000 while an estate agent values it at £650,000 — and both figures are correct. This article unpacks the difference between historical cost and fair value accounting, why UK SME balance sheets rarely reflect true market worth, and the specific moments — selling up, borrowing, insuring — when you need a real valuation instead.
A year-end note showing a surprise retirement benefit liability sends many SME owners searching for answers. This article unpacks why defined contribution pensions barely register on the balance sheet while defined benefit schemes create a measured, monitored liability under IAS 19 and FRS 102 Section 28, with a full worked example of actuarial movements, journal entries, and covenant implications.
A dollar invoice that shrinks on paper without any discount or dispute can baffle SME owners at year end. This article unpacks how IAS 21 and FRS 102 Section 30 require foreign currency transactions to be recorded at the spot rate and then retranslated, walking through a worked $50,000 example, the monetary versus non-monetary distinction, and the tax implications of exchange gains and losses.
Trade receivables can look healthy on paper right up until a customer collapses and takes a chunk of your profit with them. This guide explains how IFRS 9's expected credit loss model differs from FRS 102's incurred loss approach, and walks through a real provision matrix calculation, journal entries, and the accounting policy choice under paragraph 11.2 that lets FRS 102 preparers apply IFRS 9 instead.
When a lawsuit, warranty claim, or dispute is still unresolved at year-end, should it appear in the accounts? IAS 37 and FRS 102 both apply a strict three-question test — present obligation, probable outflow, reliable estimate — to decide between a provision, a disclosure note, or nothing at all. This article walks through a worked unfair dismissal claim, showing exactly how a solicitor's probability assessment becomes a defensible £27,000 provision figure, plus the tax and audit pitfalls SME owners commonly miss.
Many SME owners assume revenue should hit the profit and loss account the moment an invoice is raised or cash is collected. Under IFRS 15 and revised FRS 102, that is often wrong. This article breaks down the five-step revenue recognition model with a full worked example of a £60,000 software and support contract, showing exactly how to allocate transaction price and recognise revenue over time.
Growing businesses often outgrow FRS 105 without realising it. This guide compares FRS 105, FRS 102 and IFRS with a worked example showing how the same investment property produces three very different sets of numbers.
