Closing the GAAP
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland is the final main piece of the jigsaw in the FRC’s new financial reporting regime following the issue of FRSs 100 and 101, as discussed in our previous edition, last year. Specialist rules for insurers are still to come. The new regime will require current adopters of full UK GAAP to choose between EU-IFRS (in full or by adopting the reduced disclosure regime of FRS 101) and FRS 102 for accounting periods starting on or after 1 January 2015. Those using the FRSSE, however, will be able to carry on doing so.
FRS 102 is an IFRS-based framework but, with a view to simplification for the preparer, includes some significant accounting differences from EU-IFRS. These include requiring the amortisation of goodwill and permitting the expensing of borrowing and development costs. In some areas, particularly the accounting for financial instruments, it is significantly different from current UK GAAP.
The new standard includes a reduced disclosure regime which will allow the individual accounts of parents and subsidiaries to omit certain disclosures when, among other conditions, the entity is included in publicly available consolidated financial statements (‘qualifying entities’). The exemptions are significant and include cash flow statements, certain group share-based payment disclosures and (unless the qualifying entity is a financial institution) information about financial instruments. These are similar to the disclosure exemptions in FRS 101, available to qualifying entities otherwise using the recognition and measurement approach of EU-IFRS.
Groups will be able to pick and choose on a subsidiary-by-subsidiary basis whether to apply FRS 101 or FRS 102.
Choices will need to be made in time for the December 2015 financial statements. FRS 102 can be early-adopted for 31 December 2012 year ends onwards and FRS 101 also for earlier year ends. Adoption in 2015 will require the restatement of comparatives for 2014 and the preparation of a transition balance sheet at the start of the 2014 financial year.
If you have any comments on this edition, or if you would like one of your colleagues to receive future editions, please contact me at: FinancialReportingMatters@kpmg.co.uk.
Senior Technical Partner