Explanation of Transition - Prior Year Adjustments
Reconciliation of equity
Capital and reserves as at 01.06.2015 (as previously stated) £97,043 less HP interest restated (a) £2,233 less holiday pay accrued (b) £372 to show capital and reserves restated of £94,438.
Capital and reserves as at 31.05.2016 (as previously stated) £275 less bank loan interest and HP interest restated (a) £2,742 less holiday pay accrued (b) £413 to show capital and reserves restated of £(2880).
(a) Bank interest and HP interest has been recalculated using the effective interest rate method as required by FRS 102 section 1A, previously it was calculated on a straight line basis. Consequently, additional HP interest of £2,233 was recognised at 1 June 2015 and additional bank loan interest and HP interest of £510 was recognised at 31 May 2016 and the effect on profit for the year ended 31 May 2016 is an additional expense of £510.
(b) FRS 102 section 1A requires the cost of short term compensated absences to be recognised when employees render the service that increases their entitlement, previously this has not been provided for. Consequently, an additional holiday pay accrual of £372 at 1 June 2015 has been made to reflect this. The additional provision at 31 May 2016 is £41 and the effect on profit for the year ended 31 May 2016 is an additional expense of £41.
Reconciliation of profit for the year
Profit for the year to 31 May 2016 as previously reported £248,902 less bank and HP interest restated (a) £510 less holiday pay accrual (b) £41 shows profit for the year to 31 May 2016 restated of £248,351.