FRC calls for feedback on FRS 102
On 23 March 2021, the Financial Reporting Council (FRC) issued confirmation that they intend to commence the next periodic review of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The last triennial review was completed in December 2017 with the amendments taking effect for accounting periods commencing on or after 1 January 2019.
The triennial review in 2017 gave rise to several changes to the suite of accounting standards which comprise UK GAAP, but most of those changes were editorial in nature or were merely clarifications of existing requirements. However, some of the changes did result in changes to some recognition and measurement principles. For example, including additional accounting policies in FRS 102 such as enabling intra-group investment property to be measured under the cost model; and permitting off-market rate loans from director-shareholders to small entities to be recognised at transaction price.
Since the 2017 triennial review, there have been a number of subsequent changes made to UK GAAP, such as changes to reflect:
- amendments in respect of multi-employer defined benefit plans when information becomes available to enable defined benefit accounting to be applied;
- phases 1 and 2 of the interest rate benchmark reform as IBOR is being phased out this year;
- Covid-19-related rent concessions; and
- the UK’s exit from the EU.
In the Basis for Conclusions, para A.45 of FRS 102 there is confirmation that the FRC will subject the standard to periodic reviews every four or five years. This was a preference taken by the FRC rather than doing triennial reviews so as to enable experience of the most recent edition of the standard to develop before commencing the next review. This is also consistent with one of the FRC’s overarching objectives of standard-setting in the Basis for Conclusions para A.2(b) which is to:
| … balance improvement, through reflecting up-to-date thinking and developments in the way businesses operate and the transactions they undertake, with stability. |
While the focus of the FRC’s periodic review is on FRS 102, the other standards in the suite of UK GAAP (see below) will also be reviewed. The primary purpose of this review is to ensure that the standards remain up-to-date and continue to require high-quality and cost-effective financial reporting from entities within their scope.
FRS 101 Reduced Disclosure Framework is reviewed by the FRC on an annual basis anyway. This is to ensure that developments in the world of IFRS are tracked to ensure disclosure exemptions remain up-to-date and to respond to stakeholder feedback about improvements.
The last amendments proposed to FRS 101 were in FRED 77 Draft amendments to FRS 101 Reduced Disclosure Framework 2020/21 cycle which was issued in November 2020. Comments on FRED 77 closed at the end of February 2021. FRED 77 proposes narrow-scope amendments in respect of some disclosure exemptions relating to IAS 16 Property, Plant and Equipment and removal of references to redundant paragraphs in IAS 1 Presentation of Financial Statements.
The initial process of the periodic review is to seek views from stakeholders on areas that may be considered as part of this next review. To this end, the FRC are seeking views from preparers as to what could be improved, what could be changed and what appears to be working well in practice.
The FRC actively encourage preparers to send in constructive feedback which may influence the FRC’s work during the periodic review. Therefore, if you feel that something within an accounting standard may benefit from improvement, or you have any suggestions for the FRC relating to the suite of UK GAAP, you are encouraged to send in your comments.
The comment period for this initial call for feedback is quite long and closes on 31 October 2021. Comments can be emailed to the FRC using ukfrsperiodicreview@frc.org.uk. All feedback received will be read by the FRC and feedback can be provided on any FRS in the suite of UK GAAP which comprises:
- FRS 100 Application of Financial Reporting Requirements
- FRS 101 Reduced Disclosure Framework
- FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland
- FRS 103 Insurance Contracts
- FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime
(Note: FRS 104 Interim Financial Reporting is not an accounting standard and hence is not included in the above list).
The FRC have also said that they expect to hold roundtable events for stakeholders to provide their views. This will, of course, depend on the current Covid-19 restrictions and it is expected the FRC will announce further details on this in due course.
Current timetable for amendments to be effective
The FRC have confirmed that any changes to accounting standards which are proposed as a result of this forthcoming periodic review will be subject to public consultation at a future date (which was the case in the 2017 triennial review). This consultation is not expected to be before 2022.
Any effective date for the amendments is currently expected to be 1 January 2024. This effective date is not ‘set in stone’ at the current time and hence could be subject to change.
Category: Accounting and standards
