The Financial Reporting Council (FRC) has today issued amendments to Irish and UK accounting standards which conclude the ongoing periodic review of the FRS 100 to FRS 105 standards, and significantly, FRS 102. Periodic reviews take place approximately every 5 years and consider issues which may merit changing the extant standards, including developments in IFRS Standards, feedback from stakeholders and new or developing topics that need to be addressed in an accounting standard. These amendments represent the completion of the second periodic review of the standards.
In late 2022/early 2023, the FRC issued FRED 82 which set out the proposed amendments to the standards as part of the periodic review. The Institute issued a response to this in 2023.
Some of the key amendments made by the FRC include;
- Significant changes to lease accounting for FRS 102 preparers, with many leases now being required to be recognised on the balance sheet. These new rules are consistent with the requirements of IFRS 16 Leases, but will include some simplifications whereby certain leases will be exempt from the new requirements (notably for short-term leases & low-value assets). There will also be other practical simplifications relating to rates used, contract modifications and sale & leasebacks. No significant changes have been made to lease accounting under FRS 105 compared to the current standards.
- Significant changes to revenue recognition requirements under both FRS 102 and FRS 105. The revenue recognition sections of both standards have been retitled & rewritten based on IFRS 15 Revenue from Contracts with Customers. A central feature of the new requirements in both standards is the incorporation of a five-step revenue recognition model. The new model is intended to provide a single comprehensive framework for revenue recognition. Some simplifications are included in the standards compared to IFRS 15 (with further simplifications offered in FRS 105 for micro-entities).
Other changes to FRS 102 arising from the periodic review include;
- Section 2 Concepts and Pervasive Principles has been rewritten to align with the IASB’s Conceptual Framework for Financial Reporting.
- A new Section 2A Fair Value Measurement has been introduced, replacing the previous appendix to Section 2.
- A new paragraph 3.8A has been added to section 3 of FRS 102, requiring disclosure of the fact that financial statements have been prepared on a going concern basis, confirmation that management has considered information about the future as well as any significant judgements made in assessing the entity’s ability to continue as a going concern.
- Section 7 Statement of Cash Flows has been amended to introduce disclosure requirements relating to Supplier Finance Arrangements. Section 1 has also been amended to exempt qualifying entities from making these disclosures (subject to equivalent disclosures being made in its consolidated financial statements).
- The ability for a company to newly adopt the recognition and measurement provisions of IAS 39 as an accounting policy choice under section 11.2 of FRS 102 will be restricted to situations where adopting the option is necessary to achieve group consistency.
- The effective date for most of the proposed amendments is periods beginning on or after 1 January 2026. Early adoption is permitted, provided all amendments are applied together. There is one exception to this relating to the supplier finance arrangements amendments which are effective for periods beginning on or after 1 January 2025.
The FRC decided not to amend the standard to incorporate the expected credit loss model from IFRS 9 into FRS 102, but have noted their intention to reconsider this matter in the future.
LOADING...