Impact of FRS102 Part 1: Employee Costs

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In the first of a series of articles on FRS102 we look at some of the changes to employment costs under FRS102.

Holiday Pay Accrual

Under FRS102, unfulfilled obligations in relation to short-term employment benefits will result in a liability being shown in the balance sheet.  The most common example of this will be holiday pay. Under FRS102, the value of holidays that staff have earned but will not take until the next financial year must be provided for as a liability. The following example demonstrates how the holiday pay accrual will be calculated.


Staff member is entitled to 20 days holiday per year and has not taken any so far this year.  The Credit Union has a 30 September year end and a 31 December holiday year end. The cost of employing the member of staff is £75 per day.

Holidays earned: percentage of year completed x total holiday entitlement (3/4 x 20= 15)

Holidays carried forard= 15 days earned less 0 days taken = 15 days

Holiday Pay Accrual= 15days x £75 =£1,125

Changing your holiday year to match your financial year  will help reduce this creditor and the amount of work required to calculate the accrual. It should be noted that a holiday pay accrual can still arise when the holiday year matches the financial year if staff can carry forward holidays to the next year.

Key Management Remuneration

There is also a requirement under FRS102 to disclose the total key management remuneration paid by the organisation. It may be an issue though for Credit Unions with only one member of senior management as it will be clear from the accounts as to how much they are earning.

The definition of key management in the FRS is “Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity”. It is therefore open to interpretation as to who would be covered by this definition.