FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland replaces all the UK Financial Reporting Standards and UITF Abstracts in issue prior to the new UK financial reporting regime.
Published: March 2013.
Revised: September 2015.
Effective for accounting periods beginning on or after 1 January 2015.
The standard was revised in 2015, and a new Section 1A was introduced for entities classified as small. This replaced the FRSSE with effect from 1 January 2016. Section 1A sets out the presentation and disclosure requirements for small entities based on the new small companies regime within company law. The recognition and measurement requirements of FRS 102 continue to apply to companies applying Section 1A.
FRS 102 includes some disclosure exemptions for subsidiary and parent companies meeting certain conditions in their individual accounts. The main exemptions are from:
FRS 102 will be applied by all entities which are neither required nor elect to apply:
Until 1 January 2016, it will therefore be applied by the majority of large and medium-sized UK entities, including public benefit entities, retirement benefit plans and financial institutions.
With effect from 1 January 2016 (or earlier, if adopted), Section 1A Small Entities may be applied by:
*To the extent that the requirements of Section 1A do not conflict with any statutory framework under which such entities report, for example, from a SORP making body.
The amendment is effective from the effective date of FRS 102 - 1 January 2015.
The amendment permits the amortised cost measurement for a wider range of debt instruments. FRS 102 requires that in general ‘basic’ debt instruments are measured at amortised cost and ‘non-basic’ debt instruments at FVTPL unless this would not be permitted by law. The FRS 102 rules to determine whether a debt instrument is ‘basic or ‘non-basic’ were, prior to the amendment considered to be overly restrictive and in some cases resulted in measurement of an instrument at FVTPL that would be measured at amortised cost under IAS 39/IFRS 9. The amendments therefore refine the rules such that more debt instruments are classified as ‘basic’.The amendment also removes restrictions on hedge accounting and broadens the eligibility criteria such that more risk management hedges qualify for hedge accounting. The ‘highly effective’ criterion for hedge accounting has also been removed and instead an ‘economic relationship’ is the only requirement between hedged item and hedging instrument.
The version of FRS 102 published in August 2014 has been updated for these amendments.
The amendment is effective from the effective date of FRS 102 - 1 January 2015.
The amendments enable sponsoring employers reporting under UK GAAP to continue with current practice in accounting for defined benefit pension schemes.
Amendments to section 26 Share-based payment are effective for accounting periods beginning on or after 1 January 2015, with early adoption permitted. Other amendments including the small entities amendments are effective for accounting periods beginning on or after 1 January 2016. Early application is permitted but a company must apply the amendments together with The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI 2015/980).
The amendments to section 26 Share-based payment reverse the previous default accounting treatment where an entity has a choice of settling in cash or shares. Such transactions are no longer to be treated as cash settled; instead they are treated as equity settled unless this does not reflect the substance of the transaction.
The small entities amendments introduce a new section 1A, which details presentation and disclosure requirements applicable to small entities that choose to apply the small entities regime. These entities must apply the recognition and measurement requirements of FRS 102. Other amendments include:
These amendments are effective for accounting periods beginning on or after 1 January 2017. Early application is permitted.
The amendments made to paragraphs 34.22 and 34.42 revise the disclosure requirements for financial institutions and retirement benefit plans. They relate to the disclosure of financial instruments in an analysis based on the fair value hierarchy.
Effective for accounting periods beginning on or after 1 January 2016.
The amendment removes the requirement for a qualifying entity to notify its shareholders about the proposed use of disclosure exemptions.
Effective immediately with retrospective application available for accounting periods beginning on or after 1 January 2016.
FRS 102 requires that loans from directors are initially measured at present value. It is proposed in FRED 67 (see current proposals below) that small entities will have the option to measure such loans at transaction price rather than present value. As small entities are required to apply FRS 102 for annual periods beginning on or after 1 January 2016 but the proposals in FRED 67 are not expected to be finalised until December 2017, amendments are made to FRS 102 as an optional interim measure to allow small entities to measure loans from directors at transaction price in their first set of FRS 102 financial statements.
The principal effective date for the amendments is accounting periods beginning on or after 1 January 2019, with early application permitted as long as all amendments are applied at the same time. Exceptions to this are the amendments in respect of directors’ loans and tax effects of gift aid payments, for which early application is permitted separately.
The December 2017 amendments are the conclusion of the first triennial review of FRS 102. Many of the amendments are editorial in nature or clarify, but do not change, existing guidance. The main changes that will impact the financial statements are as follows:
(a) The removal of undue cost or effort exemptions, which are replaced by accounting policy options where relevant. An accounting policy choice is introduced for entities that rent investment property to another group entity to measure that property either using the cost model or fair value model.
(b) The introduction of a description of a basic financial instrument, which will result in additional financial instruments being classified as basic.
(c) For small entities, the option to measure a loan from a director-shareholder (or a close member of family) at transaction price rather than present value.
(d) More flexible guidance on the recognition of intangible assets separately from goodwill in a business combination. Entities may choose to recognise such intangibles if this provides useful information to the entity and users of financial statements. The policy should be applied consistently to the relevant class of intangible assets.
(e) An amendment to the definition of a financial institution to remove references to ‘generate wealth’ and ‘manage risk’. As a result fewer entities should meet the definition.
(f) The income tax effects of gift aid payments by subsidiaries to their charitable parents are taken into account at the reporting date when it is probable that the gift aid payment will be made in the following nine months.
More information on the new financial reporting regime, including the full range of resources, is available on the new UK GAAP section of our website icaew.com/newukgaap
The FRC has issued a series of Staff Education Notes (SENs) for users of FRS 102. These illustrate some of the requirements of the standard but are not definitive statements on the application of the standard, nor are they a substitute for reading the requirements of FRS 102. The topics covered are:
Entities that use Section 1A Small Entities of FRS 102 may still find the SENs useful because the recognition and measurement requirements of FRS 102 also apply to these entities. Where the SENs provide guidance relating to the presentation and disclosure requirements of FRS 102, small entities should refer to the applicable requirements of Section 1A, since some of the FRS 102 requirements may not apply to them. The FRC has published a table summarising to what extent the SENs may be useful for entities applying Section 1A of FRS 102.
This page was last updated on 17 April 2018