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Deloitte comment letter on the periodic review of FRS 102

Published on: 29 Oct 2021

We have published our comment letter on the periodic review of FRS 102 and other UK and Ireland accounting standards.

In general, we consider that the UK financial reporting regime is working well and is achieving the intended objectives. We have developed our response in the context of the Financial Reporting Council's (FRC's) aim to achieve consistency with global accounting standards through the application of an IFRS-based solution unless an alternative solution is clearly better. With this in mind, we support the implementation of the principles of IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases into FRS 102, with appropriate simplifications, clarifications and transitional provisions to achieve a proportionate solution.

However, we are not in favour of introducing the impairment model of IFRS 9 Financial Instruments for all FRS 102 reporters and instead recommend that a sub-set of FRS 102 preparers with fiduciary responsibilities should, instead, be required to apply IFRS 9 rather than Sections 11 and 12 of FRS 102 (together with the disclosure requirements set out in IFRS 7).

In progressing the periodic review, we strongly urge the FRC to work with the UK government and specifically the Department for Business, Energy and Industrial Strategy (BEIS) to achieve broader reform of the UK corporate reporting regime. Of particular relevance to the periodic review is the opportunity to revisit the current regimes for small companies and micro-entities and question whether they are functioning as desired.

Furthermore, more widely, difficulty continues to exist in reconciling the requirements set out in the Accounting Regulations (SI 2008/409 and SI 2008/410) with those in accounting standards. We therefore call upon the FRC and BEIS to collaborate on a project to remove (or at least, significantly reduce) the accounting requirements contained in the Accounting Regulations and to place the remit for developing accounts presentation and disclosure squarely with the FRC (or its successor).

Given the substantial issues which need to be considered as part of this periodic review, we consider the timeframe for publication of an exposure draft and the proposed effective date of the revised standards to be rather optimistic. We would prefer that the FRC take the time to gather appropriate input and feedback and to consider carefully how to implement new requirements such as those in IFRS 15 and 16 in a proportionate manner while preserving the core principles of those standards.

The full response is contained within the comment letter which can be downloaded below.

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