As part of the review, it is keen to engage with preparers and users of financial statements under FRS 102 including lenders and auditors on areas they consider ripe for improvement before a more formal consultation of potential changes kicks in. Areas of interest could include new issues or transactions that should be addressed or proposed changes to existing requirements.
UK and Ireland accounting standards are subject to periodic reviews at least every five years as part of the process to ensure they remain up-to-date and meet their objective of requiring high-quality and cost-effective financial reporting that’s proportionate to the entities that fall within their scope and meets users’ needs.
Jenny Carter, Director of Accounting and Reporting Policy at the FRC, told ICAEW Insights that in addition to stakeholder feedback, the review would also consider recent developments in financial reporting including changes in IFRS and changes to the wider reporting framework. In particular, issues around leases and revenue and the expected credit loss model would likely be under the spotlight, she said.
“Financial reporting needs to respond to changes in the way businesses operate and changes to user needs in terms of information. We do need to look at it periodically to make sure we’re still meeting that objective,” Carter said.
The COVID pandemic could have a significant impact on the focus of the review and shift the focus onto specific areas in need of clarification or simplification without reducing the quality of information financial statement provided to users, Carter said.
Similarly, amendments made in the last year around Covid-related rent concessions and grant accounting were likely to have applied to more organisations now than in the past. “There may be some areas that entities are having to look at for the first time or with more significance that might mean they warrant closer examination,” Carter explained.
Meanwhile, scope to simplify the current FRS 102’s 400+ pages of rules and consolidate reporting requirements is always on the agenda, Carter added. “We’re always looking for ways to enhance brevity and usefulness in financial reporting so there may also be areas that we can relax a bit or disclosure that we can take out. It’s not necessarily about adding requirements but it’s about making sure the whole package results in the right level of reporting.”
Following initial feedback, the FRC is also planning a series of more targeted roundtable events for stakeholders to provide their views on specific standards and topics that crop up. Any changes to accounting standards that are proposed as a result of the periodic review will be subject to public consultation at a later date, not expected to be before 2022. The effective date for any amendments is currently expected to be 1 January 2024.
ICAEW will be responding to the FRC and members are invited to share their views by contacting the Financial Reporting Faculty at frf@icaew.com. Alternatively, stakeholders can provide comments on any aspect of the standards to ukfrsperiodicreview@frc.org.uk by 31 October 2021.
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