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FRC proposes amendments to FRS 101 and FRS 102

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31 Jan 2019

The Financial Report Council (FRC) has issued FRED 70 ‘Draft amendments to FRS 101 – 2018/19 cycle’ and FRED 71 ‘Draft amendments to FRS 102 – Multi-employer defined benefit plans’.

FRED 70 arises from the annual review of FRS 101 Reduced Disclosure Framework. FRS 101 requires the application of the recognition and measurement requirements of EU-adopted IFRS with reduced disclosures. Unlike accounts that apply IFRS in full (IAS accounts), those prepared in accordance with FRS 101 (non-IAS accounts) must comply with detailed accounting requirements set out in company law. Some of these requirements conflict with the requirements of IFRS 17 Insurance Contracts. The primary conflict being in relation to Schedule 3 formats of the primary statements; the approach and methodology that underpins IFRS 17 is so fundamentally different that presenting amounts determined in accordance with that standard, within the formats laid down in law for non-IAS accounts, is not possible. Consequently, FRED 70 proposes amendments to the definition of a ‘qualifying entity’ such that entities that are required both to comply with Schedule 3 to the Regulations and have contracts within the scope of IFRS 17 may not be qualifying entities. This means that these entities cannot apply FRS 101. The proposed amendment is necessary to ensure that insurance companies that are not required to, and choose not to, prepare IAS accounts, continue to comply with company law requirements by only applying FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and FRS 103 Insurance Contracts. The comment period for FRED 70 closes on 30 April 2019.

FRED 71 responds to a current financial reporting issue by proposing new requirements, to be included in Section 28 of FRS 102, for presenting the impact of transition from defined contribution accounting to defined benefit accounting. Such a transition is required by FRS 102 when sufficient information becomes available for an employer participating in a multi-employer defined benefit plan to apply defined benefit accounting. It is proposed that the amendments are effective for accounting periods beginning on or after 1 January 2020, with early application permitted. The comment period for FRED 71 closes on 31 March 2019.

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