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FCA publishes a note relating to FRS 102 cash flow exemption for investment funds

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04 Sep 2017

The Financial Conduct Authority (FCA) has issued a note regarding the use of the FRS 102 cash flow exemption for investment funds that meet certain conditions when preparing audited financial information to include within a prospectus.

Under FRS 102 The Financial reporting standard applicable in the UK and Republic of Ireland, investment funds which meet certain conditions contained within paragraph 7.1A of that Standard, are not required to prepare a statement of cash flows in accordance with Section 7 of FRS 102. However the FCA note includes important information for eligible investment companies wishing to make use of this exemption:

It is likely that a number of investment companies will meet the conditions contained in FRS 102. However a prospectus that includes audited financial information prepared according to national accounting standards (such as FRS 102) must include a cash flow statement (as specifically stated in PR Appendix 3 Annex I item 20.1).

Therefore, investment companies who qualify for the exemption in FRS 102 may wish to consider whether to make use of the exemption in FRS 102 when preparing audited financial information, as the financial information then will not contain all the information required for a prospectus.

We have power to authorise the omission of information from a prospectus in limited circumstances. These include where the information is of minor importance and unlikely to influence investors’ ability to make an informed assessment (section 87B(1) FSMA, as set out in PR 2.5.2UK). These omission requests will be considered on a caseby- case basis. Investment companies producing a prospectus who have not prepared a cash flow statement and wish to make a request to omit information should contact us at an early stage of their transaction. 

The FCA note is available of the FCA website.

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