What’s changing in company reporting?
Just before Christmas, the Financial Reporting Council published amendments to FRS 102. Jamie Tomlin, chair of the LSCA Technical Committee unpicks the changes.
Shortly before the annual break for merriment, recuperation and planning of resolutions to be broken, the FRC issued its Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, Triennial review 2017 Incremental improvements and clarifications.
Most of what had been promised in the Exposure Draft has been included in the published amendments. I will attempt to condense 194 pages into one article!
The amendments have an effective date of 1 January 2019. Early adoption is permitted, but, with two exceptions, if early adoption is taken the amendments must be applied in full. The two exceptions are:
- A small entity may account for a loan from a director shareholder at the transaction amount, and
- The tax effect of gift-aid payments from a subsidiary to a parent may be taken into account before the payment is made.
(There is actually a third, being an entire new appendix to section 1A for small entities in the Republic of Ireland.)
The main changes are all intended to assist making “…financial reporting proportionate to the size and complexity of the entity…”. These amendments do not fundamentally change the standard; but then they were only ever going to be “incremental”.
- Removal of undue cost or effort exemptions, with the “replacement carrot” of an accounting policy choice in certain cases. Specifically, investment properties rented to another group entity may be carried at cost or fair value.
- The inclusion of a general description for a basic financial instrument – if it looks and feels like a basic financial instrument, it is!
- A relaxation of the separate recognition of intangibles in a business combination. Goodwill just got bigger!
- An amendment to the definition of a financial institution, to make it easier to apply in practice.
Did the FRC give us anything extra? A soupcon. The definition of a director shareholder for the fair value exemption permits the shareholder to be part of the director’s group of close family members.
FRS 105 has been amended to now include the legal requirement to disclose the average number of employees.
For a fuller appreciation of the amendments, the Basis for Conclusions is worth reading.
Jamie Tomlin is chair of the LSCA Technical Committee.
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