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FRED 50 Residential Management Companies' Financial Statements

Background

The Financial Reporting Council (FRC) issued financial reporting Exposure Draft FRED 50 containing Draft FRC Abstract 1: Residential Management Companies’ Financial Statements setting out proposals for the treatment of residential management transactions in the financial statements of residential management companies (RMCs) in August 2013. The FRC also issued consequential amendments to the Financial Reporting Standard for Smaller Entities (FRSSE).

The proposals were that entities would be required to apply FRED 50 Draft FRC Abstract 1 and the consequential amendments to the FRSSE for accounting periods beginning on or after 1 January 2015 with early adoption permitted. 

Project Milestones 

The comment period for the Exposure Draft closed on 11 November 2013.  The FRC announced that they proposed to take this project forward as part of their review of the Financial Reporting Standard for Smaller Entities (FRSSE).

In September 2014, the FRC published its consultation document, ‘Accounting standards for small entities - Implementation of the EU Accounting Directive’ setting out the FRC’s proposals to amend UK accounting standards as part of the implementation of the EU Accounting Directive.  As part of this consultation the FRC proposed that a new sub-section of FRS 102 (within Section 34) would be added based on FRED 50 Residential Management Companies’ Financial Statements. This meant that no separate abstract would be developed as initially envisaged with FRED 50. 

In February 2015, the FRC published ‘FRED 59 Draft Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland’.  The Accounting Council’s Advice to the FRC on FRED 59 states in paragraph 32 that, based on the feedback received, the Accounting Council considers that it is not appropriate to insert a new subsection in FRS 102 but that a clear statement of the legal position is of use.  The Accounting Council therefore advised the FRC to make no change to FRS 102, or any other relevant financial reporting standard (including FRS 105).  The legal position is summarised in paragraph 33 of the Advice.

Current status of the project

With the publication of the July 2015 updates to FRS 102, the FRC confirmed that no changes to accounting standards will be made to mandate a particular treatment for residents management companies.

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