The Financial Reporting Council (FRC) has published Amendments to FRS 102 The Financial Reporting Standard in the UK and Republic of Ireland – Fair value hierarchy disclosures. These amendments are relevant only to financial institutions and retirement benefit plans as defined in FRS 102.

The FRC has amended Financial Reporting Standard (FRS) 102 following feedback that amending the fair value disclosure requirements applicable to financial institutions and retirement benefit plans would reduce the costs of complying with FRS 102 and allow these entities to provide information to users that is more consistent with EU-adopted IFRS. The amendment will also make it easier for users to make comparisons between the financial statements of these entities and those applying EU-adopted IFRS.

The amendments to paragraphs 34.22 and 34.42 of FRS 102 require disclosure of financial instruments held at fair value to be on the basis of a fair value hierarchy consistent with EU-adopted IFRS as follows:

A fair value measurement is categorised in its entirety on the basis of the lowest level input that is significant to the fair value measurement in its entirety. 

Level 1: The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3: Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability. 

These amendments apply for accounting periods beginning on or after 1 January 2017. Early application is permitted with immediate effect and is likely to appeal to many entities that would otherwise incur additional costs to comply with the previous requirements in FRS 102.

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