FRED 67: Draft Amendments to FRS 102 - Triennial Review 2017


In March 2017, the Financial Reporting Council (FRC) issued Financial Reporting Exposure Draft (FRED) 67 Draft Amendments to FRS 102 - Triennial Review 2017 proposing incremental improvements and clarifications to Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

The proposals have arisen as a result of the first triennial review of FRS 102 and after taking into account stakeholder feedback on the implementation of FRS 102.  

FRED 67 proposes amendments to: 

  • Directors’ loans – small entities will no longer need to estimate a market rate of interest when measuring loans from a director who is also a shareholder.
  • Intangible assets acquired in a business combination – fewer intangible assets will be required to be separately identified from goodwill and valued.
  • Investment property rented to another group entity – entities will now be able to choose to measure these investment properties at cost less depreciation and impairment instead of fair value. At present, such property must be measured at fair value unless the entity can conclude that determining fair value would require ‘undue cost or effort’. The undue cost or effort exemption will be removed for all investment property.
  • Classification of financial instruments – additional financial instruments will be considered ‘basic’ (and thereby measured on a cost rather than fair value basis) beyond those meeting the prescriptive conditions, if they are consistent with a new principle-based description.
  • Definition of a financial institution – financial institutions are required to provide additional disclosures about financial instruments. Fewer entities should be financial institutions following changes to the definition, although all entities will need to consider if the risks associated with the financial instruments they hold are significant enough to warrant further disclosures.

As well as the above areas, further amendments are proposed to improve and clarify existing requirements within FRS 102 although these do not change the underlying requirements of FRS 102.  Consequential amendments are also are proposed to the other UK and Ireland accounting standards, such as FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime, for consistency with FRS 102.

The FRC expects to finalise these amendments in December 2017.  The amendments will be effective for accounting periods beginning on or after 1 January 2019 with earlier application permitted if all of the amendments are applied at the same time.

Current status of the project

FRED 67 was issued on 23 March 2017.  Comments are requested by 30 June 2017.

In May 2017, the FRC amended FRS 102 to provide interim relief for small entities when accounting for Directors’ loans prior to finalisation of the proposals in FRED 67.  As it is an interim measure, this amendment will be deleted as part of the finalisation of FRED 67.  It will then be replaced with permanent requirements based on the proposals in FRED 67 after considering the outcome of the consultation process. 

In December 2017, the FRC published amendments to FRS 102 as a result of consultation in FRED 67.

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