by Niamh McCarthy
What is FRS 102?
FRS 102 is a new independent standard based on the International Financial Reporting Standard for Small and Medium Enterprises (IFRS for SMEs). The standard addresses all the recognition, presentation and disclosure requirements for entities using this standard.
FRS 102, is the new accounting framework that will be used by the majority of Irish entities. The standard replaces the current UK and Irish GAAP consisting of SSAPs, FRSs and UITF abstracts.
The standard was issued in March 2013 by the Financial Reporting Council and follows on from the issue of two other standards in November 2012, FRS 100 and FRS 101;
a) FRS 100 sets out the application of financial reporting requirements in the UK and Republic of Ireland.
b) FRS 101 or ‘IFRS with reduced disclosures’ outlines the reduced framework available for use by qualifying entities choosing to report under IFRS. FRS 102 has some different measurement rules to IFRS and this can be inconvenient for a subsidiary whose parent is using IFRS; therefore using FRS 101 will allow IFRS users to use consistent accounting policies across the group.
1. All companies currently reporting under UK or Irish GAAP will be required to report under either the new standard FRS 102 or else IFRS.
2. Under company law, IFRS continues to be mandatory for listed entities preparing group financial statements but qualifying entities i.e. subsidiaries and parent companies of groups preparing consolidated financial statements can avail of reduced disclosure requirements by applying FRS 102 or FRS 101 provided certain conditions are met.
3. Smaller companies currently eligible to adopt FRSSE, the Financial Reporting Standard for Smaller Entities, will continue to be able to do so.
The compulsory effective date for this new framework is for financial years beginning on or after 1 January 2015, therefore the transition date is 1 January 2014 in line with the graph below. A restatement of comparatives will be necessary and a reconciliation will need to be provided in respect of the opening balance sheet position in the notes in the first set of financial statements prepared under the new standard. Early adoption of FRS 102 is allowed for accounting periods ending on or after 31 December 2012.
Each set of financial statements prepared under FRS 102 shall include all of the following;
Statement of Financial Position as at the reporting date
A single Statement of Comprehensive Income for the reporting period or else a separate Income Statement and a separate Statement of Comprehensive Income
Statement of Changes in Equity for the reporting period
Statement of Cash Flows for the reporting period; and
notes, comprising a summary of significant accounting policies and other explanatory information.
FRS 102 will change the recognition criteria for various assets and liabilities, the basis on which some items are measured and the treatment of certain gains and losses compared to current UK GAAP.
Even though companies reporting under FRS 102 will continue to present the financial statements in line with Companies Acts requirements, there will be significant additional disclosures including disclosures in relation to financial instruments, goodwill and intangibles, key management personnel compensation and many others. Also, entities will be required to provide disclosure on critical judgments and accounting estimates underlying the financial statements. However, FRS 102 has a reduced level of mandatory disclosure requirements in comparison with IFRS including exemption from disclosure of a cash flow statement, certain financial instruments and related party and share-based payments disclosures.
For further details please contact Niamh McCarthy at firstname.lastname@example.org
Niamh McCarthy is Head of Accounting at City Trust’s headquarters in Dublin
This article has been prepared as a general guide and it is based on information available as at July 2014. Whilst every care has been taken in its preparation, City Trust cannot accept any responsibility for any person relying on this publication.
Professional advice should be obtained before undertaking transactions and City Trust will be pleased to provide such advice where appropriate