Irish Example Credit Union Accounts
under FRS 102
The financial statements format for Irish credit unions is not prescribed in law and
therefore varies from credit union to credit union, although a fairly common approach
has developed over time based on regulator and trade association guidance. This
example set of financial statements have been prepared to stimulate debate on what
credit union financial statements might look like under FRS 102 from 2016 onwards.
While based on the UK FRC, Staff Education Note 14, Credit unions - Illustrative
Financial statements (For the UK) example, it has been amended for Irish generally
accepted practice. It is not intended as a definitive example and comments on the
draft text are welcome, please send comments to aidan.clifford@accaglobal.com .
“FRC Introduction
This Staff Education Note has been prepared from an anonymous set of credit union
financial statements prepared in accordance with current accounting standards for the year
ended 30 September 2009 and have not been updated for any changes in legislation or for
the introduction of any potentially new financial instruments.
As a result, in some areas the disclosures in this Staff Education Note are limited (identified
by a “X”) where additional information is required to be disclosed by FRS 102, but which was
not required to be disclosed in the existing financial statements.
This Staff Education Note is written to illustrate some of the key differences between current
accounting standards and FRS 102 The Financial Reporting Standard applicable in the UK
and Republic of Ireland and is not designed to be exhaustive. There may be transactions
that a credit union may enter into, that are not reflected in these illustrative financial
statements. Credit unions should refer to relevant legislation to ensure requirements are
met. “
ACCA Ireland amendments
The FRC Staff Education Note has been redrafted for Irish credit union legislation. FRS have
had no input into the redrafting nor have they approved any of the changes or been involved
in any way in this document.
FRS 102 CREDIT UNION LIMITED
REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30TH SEPTEMBER 2016
REGISTERED NUMBER: XXXX
Table of contents
page
Chairpersons report
x
Directors report
x
Other reports
x
Statement of directors' responsibilities
x
Report of the auditor
x
Income and expenditure account
x
Balance sheet
x
Statement of changes in retained earnings
x
Accounting policies
x
Notes to the financial statements
x
Schedule 1 - other interest receivable and similar income
x
Schedule 2 - other income
x
schedule 3 - other management expenses
x
CHAIRPERSONS REPORT1
Where the credit union decide to include a Chairperson Report it should include a fair
review of the years trading and a review of the credit unions achievement of its social
objectives. Credit Union chairpersons may wish to comment on how the credit union is
improving the economic and social well-being of all members and bringing about human
and social development in the community.
The Chairperson may also wish to comment on amounts spent on community and social
projects, such as education and training of credit union staff, social projects, sponsorship of
local events or long standing members’ dinners etc…
1
This is an optional report.
DIRECTORS REPORT
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
This should include comment on the level of business for the year and a look forward to the
expected level of activity next year. Comment should also be made as to the soundness of
the credit unions finances and its ability to trade into the future.
AUTHORISATION
It is best practice to list any additional authorisation held by the credit union such as
authorised to conduct investment business (arrange life insurance and pension policies for
members), undertake foreign exchange transactions or arrange mortgage products for
members.
THE CREDIT UNIONS OBJECTIVES, POLICES AND STRATEGIES2
The purpose of our credit unions is to allow members save together and lend to each other
at a fair and reasonable rate of interest. At the year end the credit union had x% (2006:
x%) of all deposits and savings loaned to members.
€
%
Members’ savings and deposits at the year end
XXX
Loaned to members
XXX
X%
Invested in various investment
XXX
X%
The principal risks and challenges facing the credit union are loan default; not lending a
sufficient proportion of funds so that too much of the credit unions resources are tied up in
investment products; poor performance of investments; the risk that we will not have
sufficient cash resources to meet day to day running costs and repay members savings
when demanded (liquidity risk). These risks are managed by the credit union board as
follows:
Loan default
(text of how the credit union collects unpaid debts, the policy in respect of rescheduling)
Not lending enough of the surplus funds
2
The commentary in this section will be different for different credit unions and should be considered carefully
by the directors. Included here is just one example wording.
(How the credit union encourages lending, comparison of interest rates etc… policy in
respect of non prime sector)
Poor performance of investment products
(Overall policy adopted and investment strategy. Where advice is sought, whether this
advice is independent, ongoing review procedures)
Liquidity risk
(How the credit union manages this)
DIRECTORS AND BOARD OVERSIGHT COMMITTEE
The Directors and Board Oversight Committee of the credit union at 30 September 2016
and during the year are listed below:
Directors
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX (deceased)
XXXXXXXXXXXXX (appointed XX/XX/XX)
Board Oversight Committee
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX retires from the board and does not offer himself for re-election.
In accordance with Section 53 of the Credit Union Act 1997, the following directors retire
from the board and, being eligible, offer themselves for re-election.
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
In accordance with Section 58 of the Credit Union Act 1997, the following members of the
Board Oversight Committee committee retire and, being eligible, offer themselves for reelection.
XXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXXXXXXX
AUDITORS
In accordance with Section 115 of the Credit Union Act 1997, the auditors XXXX & Co. offer
themselves for re-election.
On Behalf of the Board
_________________________________
Director
_________________________________
Director
_____________________
Date
BOARD OVERSIGHT COMMITTEE REPORT
Every credit union must elect a Board Oversight Committee (BOC) consisting of 3 or 5
members. The BOC must assess whether the board of directors have operated in
accordance with the Credit Union Acct 1997 and 2012 and any Regulation or direction of
the Registrar or Central Bank. The BOC of the credit union hold at least one meeting in
every month, and meet with the board of directors at least 4 times in every year to facilitate
carrying out the oversight role. The BOC submits a written report to the board of directors
on their assessment of whether the board of directors has operated in accordance the
Credit Union Act 1997 and 2012 and any Regulation or direction of the Registrar or Central
Bank.
The BOC has access, at all times, to the books and documents of the credit union to enable
it to carry out its functions under the Act and members of the BOC have the right to attend
all meetings of the board of directors and all meetings of committees of the credit union.
The BOC ensures that at least one of its members attends every meeting of the board of
directors.
The BOC may notify the Central Bank of any concern it has, that the board of directors has
not complied with any of the requirements and the BOC shall report to the members at the
annual general meeting and, if it thinks fit, at a special general meeting, on whether the
board of directors has operated in accordance with Credit Union Acct 1997 and 2012 and
any Regulation or direction of the Registrar or Central Bank.
For the year ended 30 September 2015, the BOC wish to report that (other than as noted in
the Directors report) no matters have come to their attention that indicates that the Directors
have not complied with Credit Union Act 1997 and 2012 and any Regulation or direction of
the Registrar or Central Bank.
We extend our thanks to the Board of Directors, Manager and staff for their courtesy,
assistance and co-operation during the year.
______________________
____________________________
Chairperson
Secretary
_____________________
Date
REPORT OF THE CREDIT COMMITTEE3
There were XXXX loans approved during the year amounting to €XXXX. Home
improvements and holidays amounted to XX loans and motor car loans amounted to XXX.
XX of the loans were approved by the credit committee and XX were referred to the Board
of Directors of which XX were approved by the Board. The remainder of the loans were
approved by the loan officer and were for amounts less than the members share balance.
It may be appropriate to also include details of how loans are approved and the length of
loans, amounts rescheduled etc…
______________________
____________________________
Chairperson
Secretary
_____________________
Date
REPORT OF THE CREDIT CONTROL COMMITTEE
The vast majority of members who borrow are excellent at repaying their loan. However,
for a variety of reasons some members may find themselves in a position where they
cannot continue to make repayments. For members in such a situation it is important to
contact the Credit Union as early as possible and every effort will be made to accommodate
the members’ circumstances.
Loan write offs this year totalled €XXX compared to €XXX last year. The committee are
pleased to report that bad debts recovered amounted to €XX. Many of the members in
default have genuine reasons for non-payment. However, a very small number have no
valid reason and it is the intention of the board to pursue these members diligently and if
necessary legally.
Included here would be a discussion of the work done by the committee in trying to collect
overdue debts such as sending letters, telephoning and calling to members who may have
difficulties making their repayments and commenting that in most cases suitable
arrangements can be made to reduce or reschedule the loan.
3
The report of the credit committee and credit control committee will vary from credit union to credit union and
the example below should be tailored to the credit unions circumstances
Because the overall loan balance has increased, the Credit Union has decided to raise the
bad debt provision from €XXXX to €XXXX
Finally, our thanks to those members who have loans outstanding and continue to repay
them on time.
______________________
____________________________
Chairperson
Secretary
_____________________
Date
REPORT OF THE AUDIT COMMITTEE
The Board of Directors of FRS 102 Credit Union has established an Audit Committee
consisting of members of the Board of Directors. The Audit Committee is responsible for
overseeing the work of the internal audit function and assessing the performance of the
external auditor.
To fulfil the requirements of section 76K of The Credit Union Act (as amended) the post of a
full time / part time Internal Auditor has been established in FRS 102 Credit Union. (has
been outsourced to XYZ Accountants/ILCU). A formal internal audit plan is prepared
annually and approved by the Board of Directors (or Audit Committee where one exists).
The plan includes a risk based approach to the work of internal audit with some areas of the
credit union audited every year and other areas audited on a cyclical basis over up to a
three year period. The internal auditor reports to the Board (or Audit Committee where one
exists) on a regular basis, but at least quarterly.
REPORT OF THE MEMBERSHIP COMMITTEE4
4
Number of members at the beginning of the year
XX
New members admitted during the year
XX
Member who died
(XX)
Accounts ceased
(XX)
Number of members at the end of the year
XX
This report will vary from credit union to credit union and the example should be tailored to the credit unions
circumstances.
We are pleased to note the strong growth in membership numbers and hope that this trend
will continue.
Applications for membership must be accompanied by photo identification such as a driving
licence, passport or work identification card and a current utility bill such as an electricity
bill, tax free allowance certificate or bank statement.
______________________
____________________________
Chairperson
Secretary
_____________________
Date
STATEMENT OF DIRECTORS' RESPONSIBILITIES5
The Credit Union Act, 1997 and 2012 requires the directors to prepare financial statements
for each financial year which give a true and fair view of the state of affairs of the Credit
Union and of the income and expenditure of the Credit Union for that period. In preparing
those financial statements, the directors are required to:-
(i)
select suitable accounting policies and then apply them consistently;
(ii)
make judgements and estimates that are reasonable and prudent;
(iii)
prepare the financial statements on a going concern basis unless it is
inappropriate to presume that the credit union will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at anytime the financial position of the Credit Union and which
enables them to ensure that the financial statements comply with the Credit Union Act,
1997 and 2012. They are also responsible for safeguarding the assets of the Credit Union
and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
5
______________________
____________________________
Chairperson
Secretary
This could be included at the end of the directors report instead of here.
STATEMENT OF BOARD OVERSIGHT COMMITTEE'S RESPONSIBILITIES
The Credit Union Act, 1997 and 2012 requires the appointment of a Board Oversight
Committee which will oversee Directors in the performance of their functions, examine
books and documents of the Credit Union.
______________________
____________________________
Chairperson
Secretary
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
FRS 102 CREDIT UNION
We have audited the Financial Statements of FRS 102 Credit Union Ltd. for the year ended
30th September 2016 which comprise the Statement of Comprehensive income, the Balance
Sheet, the Statement of Changes in Retained Earnings the Cash Flow Statement and the
related notes. The financial reporting framework that has been applied in their preparation is
Irish law and accounting standards issued by the Financial Reporting Council (Generally
Accepted Accounting Practices in Ireland).
Optional paragraph
This report is made solely to the Credit Union's members, as a body, in accordance with Section 120 of the
Credit Union Acts 1997 (as amended). Our audit work has been undertaken so that we might state to the Credit
Union's members those matters we are required to state to them in an auditors' report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Credit
Union and the Credit Union's members as a body, for our audit work, for this report or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement, the directors are
responsible for the preparation of the financial statements giving a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance
with Irish law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or error. This includes an assessment
of: whether the accounting policies are appropriate to the credit union’s circumstances and
have been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial information in the annual
report to identify material inconsistencies with the audited financial statements. If we
become aware of any material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion the Financial Statements:

give a true and fair view of the state of the Credit Union's affairs as at
30th September 2016 and of its income and expenditure for the year then ended

Have been prepared in accordance with Generally Accepted Accounting Practice in
Ireland; and

Have been properly prepared so as to conform with the requirements of the Credit
Union Acts 1997 to 2012.
Other matters prescribed by the Credit Union Act’s 1997-2012



We have obtained all the information and explanations which we considered were
necessary for the purposes of our audit
In our opinion proper accounting records have been kept by the Credit Union.
The financial statements are in agreement with the accounting records
__________________________________________
John Doe FCCA - Statutory Auditor6
For and on behalf of
John Doe Auditors Limited
Chartered Certified Accountants and Statutory Auditors,
Main St, Anytown.
Date:
This could also be signed by the firm “John Doe Auditors Limited” rather than by John Doe in a personal
capacity.
6
STATEMENT OF COMPREHENSIVE INCOME
2016
€
2015
€
INCOME
Schedule
Interest on Members' Loans
Interest Payable and Similar Charges
Other Interest Receivable and Similar Income
1
XXX
XXX
XXX
XXX
XXX
XXX
Net Interest Income
Other Income
TOTAL INCOME
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
EXPENDITURE
Salaries and other wage costs
Other Management Expenses
Depreciation
Bad and Doubtful Debts (note 2)
TOTAL EXPENDITURE
2
3
SURPLUS FOR THE YEAR (Note 7)
Other comprehensive income7
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
On behalf of the Credit Union
C.E.O.:
_________________
7
Date:
Member of Board Oversight Committee:
_________________
Date:
Member of the Board of Directors:
_________________
Date:
If there is no other comprehensive income, this need not necessarily be shown, although in those circumstances
it would be good practice to add a footnote to confirm that there are no items of other comprehensive income.
FRS 102 Credit Union has chosen the single-statement approach to the Statement of Comprehensive Income.
BALANCE SHEET
As at 30 September 2016
2016
€
ASSETS
2015
€
Notes
Cash and Balances at Bank
Deposits and Investments
Loans to Members
Less: Provision for Bad and Doubtful Debts
Tangible Fixed Assets
Prepayments and Accrued Income
XXX
XXX
XXX
2 (XXX)
XXX
XXX
XXX
(XXX)
3
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
1
TOTAL ASSETS
OTHER LIABILITIES
Other Liabilities and Charges
Borrowings
6
XXX
MEMBERS LIABILITIES
Members' Deposits
Members' Shares
MEMBERS' RESOURCES
Statutory Reserves
Prudential Reserve
Other Reserves
Retained earnings
Realised reserves
Non-realised reserves
XXX
4
5
XXX
XXX
XXX
XXX
7
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
7
7
On behalf of the Credit Union
C.E.O:
Date: _______________
Member of Board Oversight Committee:
Date: _______________
Member of the Board of Directors:
Date: _______________
STATEMENT OF CHANGES IN RETAINED EARNINGS
For the year ended 30 September 2016
2016
€
2015
€
As at 1 October 2015
Total Comprehensive Income for the year
As at 30 September 2016
XXX
XXX
XXX
XXX
XXX
XXX
MOVEMENT IN RESERVES
Retained Earnings
Realised
Unrealised
As at 1 October 2015
XXX
Surplus for year
XXX
Realised in year
XXX
Transfer to dividend reserve(XXX)
As at 30 September 2016
XXX
XXX
XXX
(XXX)
XXX
Dividend
Reserve
Total
XXX
XXX
XXX
XXX
XXX
XXX
CASH FLOW STATEMENT 8
For the year ended 30 September 2016
Notes
2016
€
2015
€
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Cash flows from changes in operating assets and liabilities
Cash inflow from members shares
XX
XXX
Cash outflow from repaid members shares XX
XXX
New loans to members
XX
XXX
Repayment of loans by members
XX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Net cash flows from operating activities
XXX
XXX
XXX
XXX
XXX
XXX)
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Cash flows from operating activities
Surplus/(deficit)
Adjustments for non-cash items:
Depreciation
Impairment losses
XX
Movements in:
Accrued interest
Other receivables
Other payables
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash flow from managing liquid deposits
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year XX
8
In accordance with FRS 102 paragraph 7.2, the cash flow statement reconciles cash and cash equivalents,
which are highly liquid investments with a short-term maturity (three-months or less). Cash and cash
equivalents will include both cash and short-term deposits with other financial institutions. In accordance with
FRS 102 paragraph 7.20, the components of cash and cash equivalents are disclosed in the notes to the financial
statements.
Notes to the financial statements
For the year ended 30 September 2016
1. Legal and regulatory framework
FRS 102 Credit Union is established under the Credit Union Act 1997 and 2012.
FRS 102 Credit Union is registered with the Registrar of Credit Unions and is
regulated by the Central Bank of Ireland.
2. Accounting policies
Basis of preparation
These financial statements have been prepared in accordance with FRS 102. The Financial
Reporting Standard applicable in the UK and Republic of Ireland. The financial statements
are prepared on the historical cost basis.
First-time adoption of FRS 102
These are FRS 102 Credit Union’s first financial statements to comply with FRS 102. The
date of transition to FRS 102 is 1 October 2014. The transition to FRS 102 has resulted in a
small number of accounting policy changes compared to those applied previously. Note XX
to the financial statements describes the differences between the retained earnings and
surplus (or deficit) presented previously, and the amounts as restated to comply with the
accounting policies selected in accordance with FRS 102 for the reporting period ended at
30 September 2015 (i.e. comparative information), as well as the retained earnings
presented in the opening balance sheet (i.e. at 1 October 2014). It also describes all the
required changes in accounting policies made on first-time adoption of FRS 102.
Going concern
The directors of FRS 102 Credit Union believe that it is appropriate to prepare the financial
statements on the going concern basis.
The directors of FRS 102 Credit Union believe that in the current regulatory and business
environment, the current business model for the credit union is unsustainable in the long
term. Interest on loans combined with interest on investments may become insufficient to
cover both the costs of running the credit union and to pay a reasonable dividend to savers.
Although the credit union is currently profitable, liquid and solvent, long term projections
show that in the next five years, the credit union will have to change the way that we do
business if we are to continue to meet members’ needs and serve the community. The
Directors are actively addressing a long term strategy for the credit union, including the
possibility of merging with another credit union, (….contracting the level of service and
opening hours, expanding the product range, offering longer term loans, introducing fees,
expanding the number of ancillary products on offer such as offering insurance and other
products…..).
Income
Interest on Members' Loans is recognised when payment is received as specified in
Section 110[1] [C] [i] of the Credit Union Act, 1997 (i.e. on a cash basis). This is not
in accordance with accounting practice generally, but is consistent with normal
practice for Irish credit unions. FRS 102 and accounting practice generally would
require that interest be recognised using the effective interest method and accrued
on a daily basis.
Or
Interest on Members' Loans is recognised on an accruals basis over time
irrespective of when the interest is physically received by the credit union. An
adjustment is made to the year end amount receivable for any irrecoverable amounts
or amounts written off for whatever reason. This is the method required by Generally
Accepted Accounting Practice (GAAP) and as prescribed by Section 110(f) of the
Credit Union Act, 1997 as inserted by item 98 of Schedule 1 of the Credit Union and
Co-Operation with Overseas Regulators Act 2012.
Investment Income
Investment Income is accounted for differently depending on how the different
investments are designated at the outset and based on meeting certain criteria. The
credit union uses the following accounting methods:
Held at amortised cost
Investments designated on initial recognition as held at amortised cost are measured
at amortised cost using the effective interest method less impairment. This means
that the investment is measured at the amount paid for the investment, minus any
repayments of the principal; plus or minus the cumulative amortisation using the
effective interest method of any difference between the amount at initial recognition
and the maturity amount; minus, in the case of a financial asset, any reduction for
impairment or uncollectability. This effectively spreads out the return on such
investments over time, but does take account immediately of any impairment in the
value of the investment.
Investments at fair value
Investments held for trading and investment in stock market shares (i.e. nonconvertible preference shares and non-puttable ordinary shares or preference
shares) are included in this category. Financial assets at fair value are classified as
held for trading if they are acquired for sale in the short term. They are valued at fair
value (market value) at the year end date and all gains and losses are taken to the
income and expenditure account
The fair value of quoted investments is determined by reference to bid prices at the
close of business on the balance sheet date. Where there is no active market these
assets will be carried at cost less impairment.
Central Bank Deposits
Credit Unions are obliged to maintain certain deposits with the Central Bank. These
deposits are technically assets of the credit union but to which the credit union has
restricted access. The funds on deposit with the Central Bank attract nominal
interest and will not ordinarily be returned to the credit union while it is a going
concern. In accordance with the direction of the Central Bank the amounts are
shown as current assets and are not subject to impairment reviews.
Tangible fixed assets
Tangible fixed assets comprises items of property, plant and equipment, which are
stated at cost, less accumulated depreciation and any accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the
asset.
Deprecation is provided to write off the cost of each item of property, plant and
equipment, less its estimated residual value, on a straight line basis over its
estimated useful life. The categories of property, plant and equipment are
depreciated as follows:
Land and buildings
Office equipment
Fixtures and fittings
10 to 25 years
3 to 5 years
5 years
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and loans and advances to banks (i.e.
cash deposited with banks) with maturity of less than or equal to three months.
Financial assets – loans and advances to members
Loans to members are financial assets with fixed or determinable payments. Loans are
recognised when cash is advanced to members and measured at amortised cost using the
effective interest method.
Loans are derecognised when the right to receive cash flows from the asset have expired,
usually when all amounts outstanding have been repaid by the member.
Impairment of bad debts
FRS 102 Credit Union assesses, at each balance sheet date, if there is objective evidence
that any of its loans to members are impaired. The loans are assessed collectively in groups
that share similar credit risk characteristics. Individually significant loans are assessed on a
loan by loan basis. In addition, if, during the course of the year, there is objective evidence
that any individual loan is impaired, a specific loss will be recognised.
Any bad debts/impairment losses are recognised in the Income and expenditure account, as
the difference between the carrying value of the loan and the net present value of the
expected cash flows.
Financial liabilities members’ shares and deposits
Members’ shareholdings and deposits in FRS 102 Credit Union are redeemable and
therefore are classified as financial liabilities. They are initially recognised at the amount of
cash deposited and subsequently measured at the nominal amount.
Employee benefits
Defined contribution plans: The amounts charged as expenditure for the defined contribution
plan are the contributions payable by Credit Union A for the relevant period.
Other employee benefits: Other short and long term employee benefits, including holiday
pay, are recognised as an expense over the period they are earned.
Pension Costs
Contributions to the (Defined contribution) Pensions scheme are charged to the Income and
Expenditure Account in the period to which they relate.
Pension Costs
The Credit Union participates in the Irish league of Credit Unions Republic of Ireland
Pension Scheme (the pension scheme). This is a funded, multi credit union, defined benefit
pension scheme. Because the Credit Union is unable to identify its share of the assets and
liabilities of the pension scheme, the Credit Union, in accordance with the requirements of
Paragraph 28.11 of FRS 102, is accounting for the pension contributions as if the scheme
was a defined contribution scheme. Contributions payable to the pension scheme are
recognised in the income and expenditure account. At the year end contributions owing to
the pension fund were €XX (2015: €XX).
The overall pension scheme assets and liabilities were valued by an independent,
professionally qualified actuary as at 1 March XXXX using the Projected Unit Credit method.
The actuary calculated that the pension scheme had an overall past services actuarial deficit
at that date of €XXXm but was unable to identify how much of this deficit was attributable to
any particular credit union. The actuaries to the scheme have recommended a long term
funding requirement of XX% of salaries to eliminate the deficit. The adequacy of the funding
for the pension scheme will be monitored on an annual basis and may need to increase in
the future.
Reserves
Retained earnings are the accumulated surpluses to date that have not been declared as
dividends returnable to members. The retained earnings are subdivided into realised and
unrealised In accordance with the Central Bank Guidance Note for Credit Unions on Matters
Relating to Accounting for Investments and Distribution Policy. Investment income that has
been recognised but will not be received within 12 months of the balance sheet date is
classified as “unrealised” and is not distributable as a dividend in accordance with the
Central Bank direction. All other income is classified as “realised”. A reclassification
between unrealised and realised is made as investments come to within 12 months of
maturity date.
3. Use of estimates and judgements
The preparation of financial statements requires the use of certain accounting estimates. It
also requires the Directors to exercise judgement in applying FRS 102 Credit Union’s
accounting policies. The areas requiring a higher degree of judgement, or complexity, and
areas where assumptions or estimates are most significant to the financial statements, are
disclosed below:
Bad debts/Impairment losses on loans to members
(Say something about how Credit Union A conducts impairment reviews/bad debt review
and what sort of observable evidence is used)
Impairment of buildings
(Say something about how Credit Union A conducts impairment reviews of buildings and
what sort of observable evidence is used and include any other areas of significant
estimates or judgements, if any.)
4 Deposits and Investments
The credit union has the following investments
Irish and EMU State Securities
Accounts in Authorised Credit Institutions (Irish and Non-Irish based)
Bank Bonds
Investment in Equities
Collective Investment Schemes
Other
Total
5. Loan Arrears and Doubtful Debts
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Opening provision for bad debts
Bad debts incurred during the year
Bad debts recovered during the year
Increase / decrease in bad debt provision
Closing provision for bad debts
2016
XXXX
XXXX
XXXX
XXXX
XXXX
2015
XXXX
XXXX
XXXX
XXXX
XXXX
The current provision in the financial statements is €XXX (2015 €XXX) representing X%
(2015: x%) of the total loan book. This amount exceeds the Resolution 49 requirement by
€XXX. Loans rescheduled or refinanced during the year amounted to X.
6. Interest expense
Interest expense is the dividend paid to members for the prior year. The dividend is formally
proposed by the Directors after the year end and is confirmed at the following AGM. As a
result it does not represent a liability at the balance sheet date.
2016
€
Interest paid during the year
Dividend rate:
Share accounts
Other accounts
XXXX
Interest proposed, but not recognised
Dividend rate:
Share accounts
Other accounts
XXXX
2015
€
XXXX
2.5%
3.0%
1.0%
3.0%
XXXX
2.5%
3.0%
1.0%
3.0%
7. Key Management Remuneration
The Directors of FRS 102 Credit Union are all unpaid volunteers. The key management
team for FRS 102 Credit Union would include the credit union manager and two other senior
staff.
2016
€
2015
€
Short term employee benefits paid to
key management
XXXX
Payments to defined contribution pension schemes XXXX
Total key management personnel compensation
XXXX
XXXX
XXXX
XXXX
8. Tangible Fixed Assets
Cost:
At 1 October 2006
Additions
Disposals
At 31 March 2007
Building
Office
Equipment
Other
Total
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Depreciation:
At 1 October 2006
Charge for the year
Disposals
At 31 March 2007
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
Net book value at
At 30 September 2007XXX
XXX
XXX
XXX
Net book value at
At 30 September 2006 XXX
XXX
XXX
XXX
9. Loans and advances to members – financial assets
2016
€
As at 1 October 2015
Advanced during the year
Repaid during the year
Gross loans and advances to members
Impairment losses/bad debts
Individual financial assets/loans
Groups of financial assets/loans
As at 30 September 2016
2015
€
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
10 Credit risk disclosures
Credit Union A does not offer mortgages and as a result all loans to members are
unsecured, except that there are restrictions on the extent to which borrowers may withdraw
their savings whilst loans are outstanding.
Individual members may borrow up to €XX or x% of the Credit Unions assets and the Credit
Union is currently restricted by the Central Bank to lending a maximum €100,000 of new
lending per month.
The carrying amount of the loans to members represents FRS 102 Credit Union’s maximum
exposure to credit risk. The following table provides information on the credit quality of loan
repayments. Where loans are not impaired/bad it is expected that the amounts repayable will
be received in full
2015
.
2016
Amount
Proportion
€
%
Not impaired / fully recoverable:
x
x
Neither past due nor
impaired
x
x
Up to 3 months past due
x
x
Between 3 and 6 months
past due
x
x
Between 6 months and 1
year past due
x
x
Over 1 year past due
Sub-total: loans not
x
x%
impaired fully
recoverable
Amount
€
Proportion
%
x
x
x
x
x
x
x
x
x
x
x
x%
Individually impaired/ not fully recoverable (NFR):
x
x
Not yet past due, but
impaired/NFR
x
x
Up to 3 months past due
x
x
Between 3 and 6 months
past due
x
x
Between 6 months and 1
year past due
x
x
Over 1 year past due
Total loans
X
100%
Impairment allowance
X
Total carrying value
X
x
x
x
x
x
x
x
x
x
X
X
X
x
100%
11. Bad debt/ impairment losses
As at 1 October 2015
Allowance for losses made during the year
Allowances reversed during the year
Increase in allowances during the year
As at 30 September 2016
2016
€
2015
€
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
12. Impairment losses / bad debts recognised for the year
As at 1 October 2015
Impairment of individual loans
Increase in impairment during the year
Reversal of impairment where debts recovered
Total impairment losses recognised for the year
2016
€
2015
€
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
13. Members shares
2016
XXXX
XXXX
XXXX
XXXX
2015
XXXX
XXXX
XXXX
XXXX
Term Share accounts have the following maturity
2016
Less than 1 year
XXXX
One to two years
XXXX
Two to five years
XXXX
More than five years
XXXX
2015
XXXX
XXXX
XXXX
XXXX
Regular share accounts
Special share accounts
Term share accounts
Total
XXXX
XXXX
2016
XXXX
XXXX
XXXX
XXXX
XXXX
2015
XXXX
XXXX
XXXX
XXXX
XXXX
14. Other Liabilities
General creditors
PAYE / PRSI
Audit fee
Other
15. Additional financial instruments disclosures
15a. Financial risk management
FRS 102 Credit Union manages its members’ shares and loans to members so that it earns
income from the margin between interest receivable and interest payable. The main
financial risks arising from FRS 102 Credit Union’s activities are credit risk, liquidity risk and
interest rate risk. The Board reviews and agrees policies for managing each of these risks,
which are summarised below.
Credit risk: Credit risk is the risk that a borrower will default on their contractual obligations
relating to repayments to FRs 102 Credit Union, resulting in financial loss to the Credit
Union. In order to manage this risk the Board approves FRS 102 Credit Union’s lending
policy, and all changes to it. All loan applications are assessed with reference to the lending
policy in force at the time. Subsequently loans are regularly reviewed for any factors that
may indicate that the likelihood of repayment has changed. FRS 102 Credit Union also
monitors its banking arrangements closely in light of the current banking situation.
Liquidity risk: FRS 102 Credit Union’s policy is to maintain sufficient funds in liquid form at
all times to ensure that it can meet its liabilities as they fall due. The objective of the Credit
Union’s liquidity policy is to smooth the mismatches between maturing assets and liabilities
and to provide a degree of protection against any unexpected developments that may arise.
Note 2 provides further details about the impact of the maturity mismatch on the going
concern status of FRS 102 Credit Union.
Market risk: Market risk is generally comprised of interest rate risk, currency risk and other
price risk. FRS 102 Credit Union conducts all its transactions in Euro and does not deal in
derivatives or commodity markets. Therefore FRs 102 Credit Union is not exposed to any
form of currency risk or other price risk.
Interest rate risk: FRS 102 Credit Union’s main interest rate risk arises from differences
between the interest rate exposures on the receivables and payables that form an integral
part of a credit union’s operations. The Credit Union considers rates of interest receivable
when deciding on the dividend rate payable on members’ shares. FRS 102 Credit Union
does not use interest rate options to hedge its own positions. [Need to describe how the
interest rate risk is measured and/or monitored by the Board.]
14b. Interest rate risk disclosures
The following table shows the average interest rates applicable to relevant financial assets
and financial liabilities
.
2016
2015
Amount
Av.
Amount
Av.
€
Financial Assets
Loans to members
XXXX
€
Interest
Rate
X%
XXXX
Interest
Rate
X%
The dividend payable is at the discretion of the Directors and is therefore not a financial
liability of the Credit Union until declared and approved at the AGM.
14c. Liquidity risk disclosures
All FRS 102 Credit Union’s financial liabilities are repayable on demand. The credit union
retains liquid assets amounting to x% of deposits.
14d. Fair value of financial instruments
FRS 102 Credit Union holds the following financial instruments at fair value:
Listed equity shares
Short term Government securities
Term deposit accounts
2016
XXXX
XXXX
XXXX
XXXX
2015
XXXX
XXXX
XXXX
XXXX
2016
€
XXXX
XXXX
XXXX
XXXX
2015
€
XXXX
XXXX
XXXX
XXXX
15. Cash and cash equivalents
Cash and balances with the clearing banks
Loans and advances to banks
Less: amounts maturing after three months
Total cash and cash equivalents
16. Post balance sheet events
There are no material events after the balance sheet date to disclose.
17. Dividends and Loan Interest Rebate
The following distributions were made during the period:
Dividend on Shares
2016
€
XX% €XXX
2015
€
XX%
€XXX
Loan Interest Rebate
XX%
€XXX
XX%
€XXX
The above dividends refer to the dividends paid out in those years from the surplus earned
in previous years. The directors are proposing a dividend of x% and a loan interest rebate of
x% for 2016 to be paid on (date).
18. Related Party Transactions
Loans amounting to €XXX in total, were granted to officers of the Credit Union during the
period. At 30 September 2016 the balance outstanding on loans to officers amounted to
€XXX. At 30 September 2016 savings to officers amounted to €XXX.
Any transactions with a director, spouse or close family member or business partner of a
director should be disclosed where the amount paid for the goods or service is material to
either the director or the credit union. Some example disclosures are included below.
During the year Mr X, a director of the credit union, provided printing services to the Credit
Union to the amount of €XXXX. This was for printing the annual accounts and Mr X was
chosen following an open tender from 2 other printing suppliers.
During the year Mr Y a director of the credit union, provided investment business advice in
relation to €XXXX of investments made by the Credit Union. Mr Y disclosed that he received
commissions amounting to €XXXX in respect of this advice.
On an ongoing basis Mr Z, a director of the credit union, provided provides legal services to
the credit union. This includes ongoing legal advice and initiation of court action to recover
delinquent loans. The total amount paid to Mr Y during the year was €XXXX.
19. Insurance against Fraud
The Credit Union has Insurance against fraud in the amount of €XXXX in compliance with
Section 47 of the Credit Union Act 1997.
20. Non-Audit Services
It is a requirement that any non audit services provided by the auditor be described in the
financial statements. This could include assistance with bank reconciliations, advice on
investment strategies or short term secondment of staff to cover temporary staffing
shortages. One example is included below.
During the year, the Central Bank asked every credit union in Ireland to prepare a report on
their investment products. The circular asking for the report suggested that the credit unions
auditor provide some assurance and / or assistance in the preparation of this report. XYZ &
Co Auditors were engaged to assist the credit union in making the report. The Central Bank
were satisfied with our report and no regulatory action was taken.
21. Transition to FRS 102
FRS 102 Credit Union has adopted FRS 102 for the first time in these financial statements
for the year ended 30 September 2016. The reconciliations below highlight the key impacts
on both the surplus for the financial year and the retained earnings.
Reconciliation of surplus from previous UK accounting standards to FRS 102 2016
Surplus/ (deficit) as previously reported
Short term employee benefits
Surplus (in accordance with FRS 102)
2016
€
XXXX
XXXX
2015
€
XXXX
XXXX
XXXX
XXXX
Reconciliation of retained earnings from previous UK accounting standards to FRS 102
Retained earnings
Short term employee benefits
Retained earnings (in accordance with FRS 102)
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
The adjustments are:
21a. Employee benefits
Under Irish accounting standards, FRS 102 Credit Union did not make a provision for holiday
pay, i.e. holiday earned but not taken prior to the year end. In contrast, FRS 102 requires the
cost of short-term compensated absences to be recognised when employees render the
service that increases their entitlement. As a result an additional accrual has been made to
reflect this.
Schedule 1 - Other Interest Receivable and Similar Income
2016
2015
Investment Income
XXX
XXX
Bank interest
XXX
XXX
Total
XXX
XXX
Schedule 2 - Other Income
2016
XXX
XXX
XXX
XXX
2015
XXX
XXX
XXX
XXX
Schedule 3 - Other Management Expenses
2016
Rent and Rates
XXX
Lighting, Heating and Cleaning
XXX
Repairs and Renewals
XXX
Security
XXX
Printing and Stationery
XXX
Postage and Telephone
XXX
Donations and Sponsorship
XXX
Debt Collection
XXX
Promotion and Advertising
XXX
Training Costs
XXX
Convention Expenses
XXX
Chapter Expenses
XXX
AGM Expenses
XXX
Travel and Subsistence
XXX
Entertainment Costs
XXX
Bank Charges
XXX
Overdraft Interest
XXX
Audit Fee
XXX
Accountancy Charges
XXX
Board Oversight Committee Expenses
XXX
General Insurance
XXX
Share and Loan Insurance (Gross)
XXX
Pension
XXX
Legal & Professional Fees
XXX
Computer Maintenance
XXX
Bad Debts Written Off
XXX
Miscellaneous Expenses
XXX
Death Benefit Insurance
XXX
Losses on Investments
XXX
Affiliation Fees
XXX
SPS Contribution
XXX
Regulatory Levy
XXX
Other Expenses
XXX
Total
XXX
2015
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
ECCU Insurance Rebate
Fees
Other Income
Total
ACCA Disclaimer
This document is for information purposes only and does not give, or purport to give,
professional advice. It should, accordingly, not be relied upon as such. No party
should act or refrain from acting on the basis of any material contained in this
document without seeking appropriate professional advice.
While every care has been taken by ACCA in the preparation of this document, we
do not guarantee the accuracy or veracity of any information or opinion, or the
appropriateness, suitability or applicability of any practice or procedure contained
therein. To the fullest extent permitted by applicable law, ACCA shall not therefore
be liable for any damage or loss, including but not limited to, indirect or
consequential loss or damage, loss of data, income, profit or opportunity and claims
of third parties, whether arising from the negligence, or otherwise of ACCA, its
employees, servants or agents, or of the authors who contributed to the text.
Similarly, to the fullest extent permitted by applicable law, ACCA shall not be liable
for damage or loss occasioned by actions, or failure to act, by any third party, in
reliance upon the terms of this document, which result in losses incurred either by
ACCA, those for whom they act as agents, those who rely upon them for advice, or
any third party. ACCA shall not be liable for damage or loss occasioned as a result of
any inaccurate, mistaken or negligent misstatement contained in this document.
This document is based on an FRC publication titled “Staff Education Note 14, Credit
unions - Illustrative Financial statements”.
Reproduction of the FRC Disclaimer on Staff Education Note 14, Credit unions
- Illustrative Financial statements
“This Education Note has been prepared by FRC staff for the convenience of users
of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of
Ireland. It aims to illustrate certain requirements of FRS 102, but should not be relied
upon as a definitive statement on the application of the standard. The illustrative
material is not a substitute for reading the detailed requirements of FRS 102.”