1st January 2015 is now only a few weeks away, and after all the months and months of talking about it, UK GAAP will finally change.
From 1 January 2015, all the existing FRSs, SSAPs and UITF abstracts will be obsolete, and in their place will stand FRS 102 and FRSSE 2015, with the option to apply full IFRS, or alternatively, FRS 101 if the entity qualifies.
The majority of businesses currently applying UK GAAP as opposed to IFRS will probably choose to apply FRS 102 or FRSSE 2015. FRS 101 is likely to have a much more limited application, but nonetheless it is important to understand what all the options are before making a decision as to which standard to apply.
What is FRS 101?
FRS 101 is essentially a reduced disclosure framework that provides reduced disclosure exemptions from EU-adopted IFRS for qualifying entities. A qualifying entity is a member of a group where the parent of that group prepares publicly available consolidated financial statements which are intended to give a true and fair view, and that member is included in the consolidation.
FRS 101 sets out a reduced disclosure framework which addresses the financial reporting requirements and disclosure exemptions for the individual financial statements of those qualifying subsidiaries and ultimate parents that otherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS.
The FRS may be applied to the individual financial statements of a qualifying entity, but if the entity is required to prepare consolidated accounts, FRS 101 cannot be applied in their preparation. The disclosure exemptions in FRS 101 may only be applied if the shareholders have been informed of their use and do not object. The immediate parent can object, or a shareholder holding more than 5% of the total allotted share capital, or holding more than half of the allotted shares not held by the immediate parent.
The entity must disclose in its accounts the name of the parent company, in whose consolidated accounts its financial statements are consolidated. It is also a requirement to disclose some details about the exemptions adopted.
Some of the exemptions, relating mainly to financial instruments, are not available for financial institutions, and these are set out in paragraph 7 of the standard.
Paragraph 8 sets out the disclosure exemptions. These relate to share-based payments, business combinations, non-current assets held for sale, discontinued operations, financial instruments, fair value measurement, the presentation of comparative information, accounting policies, related party disclosures and impairment of assets. FRS 101 also dispenses with the requirement to produce a statement of cash flows.
The standard can be accessed via this link.
ACCA UK has also produced a Technical Factsheet about FRS 102, and model accounts prepared under FRS 102 and FRSSE 2015. ACCA members can request the model accounts by emailing advisory@accaglobal.com quoting their ACCA membership number.