This FRS is a single financial reporting standard that applies to the financial statements of entities that are not applying adopted IFRS, FRS 101 or FRS 105. FRS 102 is designed to apply to the general purpose financial statements and financial reporting of entities including those that are not constituted as companies and those that are not profit-oriented. The requirements in FRS 102 are based on the IASB’s International Financial Reporting Standard for Small and Medium-sized Entities (‘the IFRS for SMEs Standard’), with some significant amendments made for application in the UK and Republic of Ireland. A summary of these amendments can be found here. FRS 102 is subject to a periodic review at least every five years. The first periodic review, the Triennial Review 2017, was completed in December 2017, with an effective date of 1 January 2019. The second periodic review commenced in March 2021. Publication of a Financial Reporting Exposure Draft (FRED) is expected during 2022. The proposed effective date of the amendments set out in the FRED will be determined taking into account the nature of the proposals and other relevant factors, but will not be earlier than 1 January 2025. The Table of Differences describes the relationships between UK and Ireland financial reporting standards and IFRS Standards. Related impact assessments and feedback statements to the following publications.
Tackle the latest reporting standards with FRS 101 and FRS 102 software
For accounting periods beginning on or after 1 January 2015, ‘old UK GAAP’ was replaced with full IFRS, FRS 101 (IFRS with reduced disclosures) or FRS 102 (new UK GAAP). This has transformed statutory financial reporting for companies, charities and LLPs, and organisations are still adapting to this transition.
A knock-on effect of these changes has been an increased pressure on accountants during the year-end reporting process, which is driven by tight deadlines. Despite some challenges, the move to IFRS can be seen as an opportunity to assess your current processes and technology. We have been working closely with many organisations to lessen the impact through the use of FRS 101 and 102 software.
It is highlighted in the FRS 102 overview that the ‘primary changes from the original paper are:
New guidance outlines the key tax considerations for companies transitioning from old UK GAAP to the new standards
The overview also highlights the effect in Change of Accounting Practice (COAP) Regulations (SI 2004/3271). It is stated that the ‘COAP Regulations apply to most transitional adjustments arising in respect of loan relationships or derivative contracts from change in accounting practice. As such, the Regulations are applicable to transitions to FRS 101 and FRS 102 in the same way as they applied to transitions to IAS or FRS 26. In most cases, the effect of the Regulations is to spread the transitional adjustment over 10 years, starting with the first period in which the new accounting policy applies.’ This section uses an example of an unconnected company with a loan due to be repaid in five years which has ‘non-vanilla’ terms. The example highlights the difference between the closing value and new treatment with the loan valuation at fair value spread over 10 years.
HMRC has updated its tax overview of FRS 101 and FRS 102. It highlights that the documents provide an overview of the ‘key tax considerations that arise for those companies that transition from old UK GAAP to the new standards’ and also that they have been brought up to date to reflect changes made to the standards. It is highlighted in the FRS 101 overview that the ‘primary changes from the original paper are:
+ Only available when the consolidated financial statements of the parent undertaking make equivalent disclosure. The Application Guidance to FRS 100 provides detail on the interpretation of equivalence and subsequent to the UK’s exit from the EU, this will be further updated and made available on the FRC’s website at www.frc.org.uk
* Financial institutions cannot take advantage of these disclosure exemptions other than to the extent that IFRS 13 disclosures relate to assets and liabilities other than financial instruments. Non-financial institutions may generally take advantage of these exemptions. However, additional disclosures are required if they hold certain financial instruments at fair value.
FRS 101 may be applied to the individual financial statements of a qualifying entity that are intended to give a true and fair view. A qualifying entity is a member of a group where the parent of that group prepares publicly available consolidated financial statements which are intended to give a true and fair view and that member is included in the consolidation.
Any qualifying entity taking advantage of the reduced disclosure framework must state in the notes to the financial statements that the financial statements were prepared in accordance with FRS 101. Note that as the full requirements of adopted IFRS are not complied with, the financial statements should not contain an unreserved statement of compliance with IFRS.
What is the FRS 101?
What did FRS 102 Replace?
What is the difference between FRS 102 and IFRS?
Can you switch from FRS 105 to FRS 102?