In March 2013, the Financial Reporting Council (FRC) issued FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
The new UK GAAP regime.
In March 2013, the Financial Reporting Council (FRC) issued FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This is the main part of the new UK GAAP regime and follows the issue in November 2012 of FRS 100, which explains the framework, and FRS 101, which allows the individual accounts of qualifying parent and subsidiary entities (as defined) to be prepared under IFRS recognition and measurement but with reduced disclosures from the full IFRS standards. A specialist standard for insurers has now been issued:
FRS 100 sets out which framework an entity must or may apply. It does not impose IFRSs beyond existing requirements. In a related change to the UK Companies Act, for financial years ending on or after 1 October 2012, some companies that previously applied IFRSs in their individual accounts may be able to change framework (to FRS 101, for example, or to existing UK GAAP). See the October 2012 Financial Reporting Update for more details of this change to the UK Companies Act.
Sets out a reduced disclosure framework that may be applied in the individual financial statements of qualifying group entities that otherwise apply the requirements of IFRS.
FRS 101 cannot be applied in any group accounts or in the individual accounts of a charity.
Some of the disclosure exemptions under FRS 101 are contingent on the parent's consolidated accounts giving equivalent disclosures. The meaning of "equivalent" is considered in the application guidance to FRS 100. Fewer disclosure exemptions are available to qualifying entities that are financial institutions (as defined). The exemptions of FRS 101 include certain disclosures for:
FRS 102 is a single standard providing concise financial reporting requirements. It replaces the previous body of UK GAAP accounting standards and is based on the IFRS for SMEs, with amendments for application in the UK. It incorporates some significant differences from IFRS, including: requiring the Companies Act formats to be applied by all UK entities, including non-companies;
The differences from current UK GAAP include:
Like FRS 101, FRS 102 includes a reduced disclosure regime which will allow the individual accounts of qualifying parent and subsidiary entities to omit certain disclosures. Unlike under FRS 101, charities may be qualifying entities under FRS 102. The disclosure exemptions include cash flow statements, certain group share-based payment disclosures and (unless the qualifying entity is a financial institution) information about financial instruments. Under FRS 102, all financial institutions must make additional disclosures about financial instruments.
This is the Insurance contract standard which supplements FRS 102. It is based on IFRS 4 and parts of FRS 27, with elements of the ABI SORP included as guidance. FRS 103 applies to insurance contracts, not just insurance companies – this represents a key change and will cover more transactions than current standards.
The definition of an insurance contract is codified in FRS 102 but remains consistent with FRS 26. This is a big change for life companies that are not currently applying FRS 26.
Some of the key changes include:
FRS 103 is a standard that consolidates existing rules and guidance, and imposes very few new requirements; the FRC are cognisant of the fact that wider changes are in the pipeline for the insurance industry, and do not wish to add further complicate the financial reporting landscape at this time. FRS 103 therefore aligns itself with IFRS 4, but does not mandate changes in the key aspects of recognition and measurement.
FRSs 100-103 are applicable for accounting periods commencing on or after 1 January 2015. This will require (for 31 December year ends) a transition balance sheet to be prepared as at 1 January 2014. FRSs 100 and 101 can be adopted early with immediate effect, regardless of the accounting period (although see the earlier comment on switching back from IFRS to UK GAAP). Early adoption of FRS 103 is permitted for periods ending on or after 31 December 2012.
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What are the differences between IFRS and FRS 102 - should you adopt a higher tier than you are required to?
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