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Deloitte comment letter on FRED 53

Published on: 17 Mar 2014

We have published our comment letter on the Financial Reporting Council’s (FRC's) Exposure Draft of updates to Financial Reporting Standard (FRS) 101 in the light of recent amendments and changes to EU-adopted International Financial Reporting Standards (IFRS) (FRED 53).  We agree with the majority of the proposals in FRED 53, although we do not support the proposed amendments in relation to IFRS 10 'Consolidated Financial Statements' because we believe that they are unnecessary. 

When FRS 101 was issued, the Accounting Council advised the FRC to update FRS 101 at regular intervals to ensure that it maintains consistency with EU-adopted IFRS. FRED 53 'Draft Amendments to FRS 101 Reduced Disclosure Framework (2013/14)' is the first such proposed update. 

Our key comments include:  

  • We agree with the proposed introduction of paragraph 4A, which clarifies that FRS 101 accounts are Companies Act accounts and not IAS Accounts into the standard; the proposed changes to paragraph 6, which clarify the disclosures required by the Companies Act when a company recognises certain financial instruments at fair value, and the proposed changes to paragraph 8(l), which provide relief for qualifying entities from certain new requirements of IAS 36 'Impairment of Assets'
  • Although the issue raised by the proposed addition of paragraphs AG1(gA) and AG1(gB) regarding when an entity preparing Companies Act consolidated accounts may exclude a subsidiary from consolidation is a valid one, we do not believe that it is necessary to amend IFRS 10 in the manner proposed.  In our view the appropriate way to deal with it is to add a paragraph to the scope section of FRS 101 highlighting this issue to users of the standard. This is due to the fact that an entity may not apply FRS 101 to any consolidated financial statements that it is required to or chooses to prepare, and so this issue is only indirectly relevant to preparers of FRS 101 financial statements. 

Further comments and a full response to all questions raised in the invitation to comment are contained within the comment letter which can be downloaded below.

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