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FRC publishes simplifications of FRS 102

FRS 102 application

FRS 102 application – what’s changed and what happens next?

Nick Chandler


KPMG in the UK


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Companies applying FRS 102 received a welcome early Christmas present in December when the FRC published a number of amendments to the reporting standard following its triennial review. The changes are designed to simplify existing requirements and reduce both the cost and effort involved in preparing accounts.

While not mandatory until 2019, the amendments are now available for early adoption, allowing companies to take advantage of them in their December 2017 accounts. The modifications are part of a far-reaching project to identify and resolve various problems that have arisen in applying the existing standard. The number of major changes is, however, relatively small: most of the amendments are limited to tidying up drafting issues and are not expected to have a significant effect. 

What’s changed with FRS 102?

  1. For subsidiaries of charities, gift aid payments are now confirmed as distributions that are recorded in equity when an entity becomes committed to them. This will typically be in the year that they are paid unless there is a deed of covenant in place.  At the same time, relief has also been introduced from the requirement to record tax on profits that will be paid up via gift-aid. 
  2. The FRC has introduced a policy choice allowing a lessor to measure property leased to a fellow group company at depreciated cost, rather than at fair value. This should help groups that hold their properties in separate entities within their group structure. Entities will also now be able to recognise fewer intangibles in a business combination, with the option of recognising additional assets as a policy choice.
  3. Entities will now be able to recognise fewer intangibles in a business combination with the option of recognising additional assets as a policy choice.
  4. A new principle has been introduced to determine whether financial instruments may be classified as basic. This will provide limited relief for a small number of instruments that do not quite meet the current strict requirements.
  5. For owner-managed businesses, the changes have carried forward the temporary relief that the FRC previously introduced from the requirement to record directors’ loans at fair value on initial recognition.
  6. The definition of a financial institution has been slightly relaxed: some entities that currently fall within the definition will therefore no longer qualify.

The relief from recognising tax on profits that will be paid up as distributions using gift-aid and the relief from the requirement to record directors loans at fair value are both available for early adoption without adopting the other requirements.

What happens next?

The FRC intends to publish revised versions of the standards, incorporating these changes, in early 2018.  Given that the amendments are largely intended to ease existing requirements, affected entities may wish to adopt them early.  

Entities which are not affected by the main amendments may still adopt early – or they may wish to place the amendments onto the back-burner, for consideration later in 2018.

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