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FRC publishes draft updates to FRS 101 Reduced Disclosure Framework

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17 Dec 2013

The UK Financial Reporting Council (FRC) has today published an exposure draft of its first set of annual amendments to FRS 101, the Reduced Disclosure Framework available to UK subsidiary companies that wish to apply the recognition and measurement requirements of IFRSs in their financial statements.

FRS 101 Reduced Disclosure Framework was originally published in November 2012 as part of the FRC's project to replace current UK GAAP with a new suite of standards, which also includes FRS 100 Application of Financial Reporting, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and, once finalised, FRS 103 Insurance Contracts (currently at the exposure draft stage).

FRS 101 was published in recognition of the fact that many UK groups prepare their consolidated financial statements in accordance with IFRSs rather than UK GAAP. For subsidiary entities, application of IFRSs is attractive because it would produce numbers consistent with those used to prepare the group accounts. However, many companies are put off using IFRSs for their subsidiaries by the extensive disclosure requirements.  In recognition of this, the FRC identified a number of disclosures that were, in their view, of limited usefulness in a set of subsidiary accounts. FRS 101 allows entities, in their entity only accounts, to apply the recognition and measurement requirements of IFRSs but take advantage of exemptions from these disclosures.

When FRS 101 was originally published, the FRC committed to review the standard on an annual basis and update it to ensure that it maintains consistency with IFRS and remains cost-effective for groups. FRED 53 Draft Amendments to FRS 101 Reduced Disclosure Framework (2013/14) is the first of these proposed annual updates.

The main changes proposed by the FRC are:

  • to simplify the new disclosure requirements of IAS 36 Impairment of Assets in relation to fair value measurements used in impairment reviews; and
  • to clarify how entities applying FRS 101 can adopt the new international accounting practice for investment entities (set out in IFRS 10 Investment Entities and its consequential amendments to IAS 27 Separate Financial Statements), whilst still complying with legal requirements.

It is proposed that these amendments would have the same effective date as the existing standard i.e. periods commencing on or after 1 January 2015.

The comment period for this exposure draft closes on 21 March 2014.

Click here for a link to the press release on the FRC website and here for a copy of the exposure draft itself.

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