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Proposed amendments to government Financial Reporting Manual to reflect new accounting standards

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26 Jul 2013

The Government Financial Reporting team at HM Treasury has published two Exposure Drafts (ED) proposing amendments to the government Financial Reporting Manual (FReM) to ensure that the FReM reflects the latest developments in government financial reporting.

Government Financial Reporting Manual (FReM) Exposure Draft (13)01 proposes amendments to the FReM to reflect the application of IFRS 13 ‘Fair Value Measurement’ in the public sector.  The ED highlights that “IFRS 13 raises significant conceptual issues regarding measurement and disclosure for the public sector” noting that fundamental issue is the application of the concept of exit price which IFRS 13 requires to be used to calculate the fair value of an asset or liability.  The ED highlights that the current definition of exit price in IFRS 13 to fair value assets and liabilities may be difficult to apply to the Public Sector and seeks to explore ways that IFRS 13 can be adapted in a Public Sector context whilst maintaining its key principles.    

Government Financial Reporting Manual (FReM) Exposure Draft (13)02 proposes amendments to the FReM to reflect the application of IFRS 10 ‘Consolidated Financial statements’, IFRS 11 ‘Joint Arrangements’ and IFRS 12 ‘Disclosure of interests in other entities’, issued by the International Accounting Standards Board (IASB) in 2011.  The ED also proposes to reflect amendments made to IAS 27 ‘Separate Financial Statements’ and IAS 28 ‘Investments in Associates and Joint Ventures’ in 2011 and the amendments to those standards in relation to transition guidance in June 2012 and Investment Entities in October 2012. 

FReM Exposure Draft (13)02 proposes to apply IFRSs 10, 11, 12 and the amendments to IAS 27 and IAS 28 in full except for areas that it has adapted to apply specifically to the public sector.  These areas, taken from FReM Exposure Draft (13)02 are: 

To maintain the adaptation to current group accounting standards in respect of the departmental consolidation boundary; 

To apply the principles of IAS 28 to departments and Executive Agencies only for investments in Associates and Joint Ventures classified outside of the public sector by the ONS; and 

To maintain the adaptation to current group accounting standards in respect of the Whole of Government Accounts consolidation boundary. 

The effective date for the proposed FReM amendments is 1 April 2014 

Comments are invited in writing by 13 September 2013 after which a revised version of the Exposure Drafts will be submitted to the Financial Reporting advisory Board for approval.  Details of where to send the comments is included within the Exposure Drafts.

Click for (links to Exposure Drafts):

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