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IASSA and the Companies (Accounting) Act 2017 have provided companies with new options for accounting for their 31 December 2017 year ended accounts.
FRS 105 is now available for micro entity’s where 2 of the following 3 criteria apply for the current and proceeding year; turnover of less than €700,000, gross assets of €350,000 and less than 10 employees.
FRS 105 contains simpler accounting policies appropriate for smaller entities.
Section 1A of FRS 102 is now available for small entity’s where 2 of the following 3 criteria apply for the current and proceeding year; turnover of less than €12,000,000, gross assets of €6,000,000 and less than 50 employees.
Section 1A uses the same accounting policies as full FRS 102, however less disclosures are required.
The table below sets out the main differences between FRS 105, Section 1A of FRS 102 and full FRS 102.
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What approach to use: A valuation approach is the method used to determine the fair market value of a business.
The most common approaches are:
The market approach is based on finding prices for comparable businesses or transactions in the public or private markets and using them to infer the value of the business or transaction. Two methods to determine the market value of a business are:
The income approach is based on determining future earnings and calculating the present value. Two common approaches are:
This is based on the value of business being equal to the sum of all the parts of the business. Adjusting book value of each asset or liability to fair market value.
So, which do you use: it depends on the specific circumstances of the business being valued.
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