FRC consults on changes to FRS 102 as part of its second periodic review of the standard

  • FRC Image
  • UKGAAP Image

15 Dec, 2022

The Financial Reporting Council (FRC) has published Financial Reporting Exposure Draft (FRED) 82 ‘Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review’ (“FRED 82”) which proposes changes to FRS 102 and other UK and Republic of Ireland financial reporting standards as a result of the second triennial review of the standard.

The proposed amendments are focused on updating UK GAAP accounting requirements to reflect changes in IFRS Accounting Standards and making other incremental improvements and clarifications.

FRED 82 proposes the following principal amendments:

  • The accounting requirements for revenue in FRS 102 and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime will be based on the five-step model for revenue recognition from IFRS 15 Revenue from Contracts with Customers, with appropriate simplifications. The extent to which this will change an entity’s revenue recognition in practice will depend on the form of its contracts with customers.
  • The lease accounting requirements in FRS 102 for lessees will be based on the on-balance sheet model from IFRS 16 Leases, with appropriate simplifications. This is expected to result in an impact on the financial statements of most entities that are lessees under one or more operating leases.

In addition, the following incremental improvements and clarifications are proposed:

  • Greater clarity for small entities in the UK applying Section 1A Small Entities regarding which disclosures need to be provided in order to give a true and fair view.
  • A revised Section 2 Concepts and Pervasive Principles, updated to reflect the IASB’s Conceptual Framework for Financial Reporting, issued in 2018.
  • A new Section 2A Fair Value Measurement, replacing the Appendix Fair Value Measurement to Section 2 and updated to reflect the principles of IFRS 13 Fair Value Measurement.
  • Removal of the option to newly adopt the recognition and measurement requirements of IAS 39 Financial Instruments: Recognition and Measurement under paragraphs 11.2(b) and 12.2(b), in preparation for the eventual removal of this option, but permitting entities already applying the option to continue to do so in the meantime.

When applicable, similar incremental improvements and clarifications are proposed for FRS 105.

In developing the FRED, the FRC has considered major and minor changes to IFRS Accounting Standards, the International Accounting Standard Board’s (IASB's) proposed changes in developing the third edition of the IFRS for SMEs Accounting Standard, stakeholder feedback in response to the FRC’s 2021 request for views, and other developments in corporate reporting. 

The proposed effective date of the amendments is accounting periods beginning on or after 1 January 2025 with early application permitted provided all amendments are applied at the same time.  Transitional provisions are also proposed. 

Comments on FRED 82, including the consultation stage impact assessment, are requested by 30 April 2023.

The FRC will be holding a webinar on 19 January 2023 to provide an overview of the proposals.  It has also published a podcast.

A press release, including links to the consultation, impact assessment and other supporting documents is available on the FRC website.  Our related Need to know publication is available here.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.