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On 23 November, the government and the Financial Reporting Council (FRC) published a letter to the accounting sector setting out the UK framework for accounting and reporting at the end of the transition period.

The letter can be viewed here.

General Requirements

All UK incorporated companies that are currently required to use EU-adopted IFRS will need to use UK-adopted international accounting standards for financial years that begin on or after 1 January 2021. On 1 January 2021, UK-adopted international accounting standards and EU- adopted IFRS will be identical.

Companies with financial years ending on 31 December 2020, can continue to use EU-adopted IFRS as it stands at the end of the transition period for the 2020 financial year, and UK-adopted international accounting standards for the next financial year.

UK GAAP Users

Generally speaking, companies that apply UK Generally Accepted Accounting Practice (UK GAAP) to prepare their accounts will not face any changes to their reporting requirements. The exceptions to this are companies that have an European Economic Area (“EEA”) parent or subsidiary or are listed in the EEA.

UK Incorporated Subsidiary with EEA Parent

UK incorporated subsidiaries with an EEA parent can no longer rely on the parent’s non-financial information statement. Where the UK subsidiary is itself in scope of producing a non-financial information statement.

It should be noted that the subsidiaries audit exemption will no longer be available for subsidiaries of EEA parents. This means that UK registered large or medium sized subsidiaries, with an immediate EEA parent, will need to have their accounts audited for financial years that begin on or after 1 January 2021.

EEA companies with UK listing

EEA companies with transferable securities admitted to trading on a UK regulated market and who use EU-adopted IFRS will not have to do anything. The UK has already determined the equivalence of EU-adopted IFRS for the purposes of the FCA’s Transparency Rules.

Note that the above also applies to Channel Island entities listed on the LSE reporting under EU IFRS.