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FRS 104

Overview

FRS 104 Interim Financial Reporting (link to FRC website) is intended for use in the preparation of interim financial reports for those entities that apply FRS 102 but may also be used as a basis for preparing interim reports by those entities applying FRS 101 Reduced Disclosure Framework. The Standard is based on IAS 34 Interim Financial Reporting, the international standard on interim reporting, with certain adaptations. It replaces the existing Accounting Standards Board (ASB) Statement Half-yearly financial reports, issued in 2007.

In December 2017, amendments were made to FRS 104 as a result of the 2017 Triennial review of FRS 102. The amendments are not substantive and are concerned with minor drafting improvements including some changes to definitions in the Glossary for consistency with changes made to FRS 102.  An entity is required to apply the amendments to FRS 104, as set out in the 2017 Triennial review amendments, for interim periods beginning on or after 1 January 2019. Early application is permitted if an entity also applies the 2017 Triennial review amendments to FRS 101 or FRS 102 for an accounting period beginning before 1 January 2019.  Most recently FRS 104 was amended to clarify the requirement to assess the going concern basis of accounting and require the disclosure of any related material uncertainties when preparing interim financial statements in accordance with FRS 104.

History of FRS 104

Date Development Comments
19 March 2015 FRS 104 issued Effective for periods beginning on or after 1 January 2015.
14 December 2017 Amended by Amendments to FRS 102 – Triennial review 2017 – Incremental improvements and clarifications Effective for accounting periods beginning on or after 1 January 2019.  Early application is permitted if an entity also applies the Triennial review 2017 amendments to FRS 101 or FRS 102 for an accounting period beginning before 1 January 2019. 
28 March 2018 Revised version of FRS 104 issued

Effective for periods beginning on or after 1 January 2015.

The triennial review amendments are effective for accounting periods beginning on or after 1 January 2019.  Early application is permitted if an entity also applies the Triennial review 2017 amendments to FRS 101 or FRS 102 for an accounting period beginning before 1 January 2019. 

24 July 2020 FRED 75 Draft amendments to FRS 104 Interim Financial Reporting - Going concern' 

The proposals in FRED 75 are expected to apply to interim periods beginning on or after 1 January 2021 with early application permitted.

October 2020 Amendments to FRS 104 Interim Financial Reporting - Going concern

The amendments are effective for interim periods beginning on or after 1 January 2021, with earlier application permitted

December 2020 Amendments to reflect changes in UK company law following the UK’s exit from the European Union that come into effect at the end of the Transition Period

The effective date for these amendments is accounting periods beginning on or after 1 January 2021. Early application is permitted in some circumstances to provide UK entities with the option to use IAS that are adopted for use within the UK after 31 December 2020, in addition to IFRS that have been adopted in the EU as at this date. This is consistent with the transitional arrangements provided in UK company law for entities preparing ‘IAS accounts’.

Scope

FRS 104, in itself, does not require an entity to prepare interim financial reports.  It is intended for use by entities that prepare annual financial statements in accordance with FRS 102 but can also be applied by entities that prepare annual financial statements in accordance with FRS 101. If such an enity applies FRS 104 it will need to read references to FRS 102 as references to the equivalent requirements in adopted IFRS as amended by paragraph AG1 of FRS 101.

Where a UK issuer of securities is subject to the requirements of the FCA's Disclosure and Transparency Rules ('DTR') but is not required to apply adopted IFRSs, it is required to include in its half-yearly financial report a condensed set of financial statements that has been prepared in accordance with pronouncements on interim reporting issued by the FRC.  Such an entity is required to apply FRS 104 in preparing those condensed financial statements.

Summary

Minimum content of an interim financial report

FRS 104 specifies that the minimum components for an interim financial report are:

  1. a condensed statement of financial position;
  2. either a single condensed statement of comprehensive income or a separate condensed statement of comprehensive income and a separate condensed income statement. Which of these is chosen should be consistent with either the presentation in the entity's most recent annual financial statements or, if a change is planned, the presentation to be used in the next set of annual financial statements;
  3. a condensed statement of changes in equity;
  4. a condensed statement of cash flows (unless the entity will not be presenting a statement of cash flows in its next annual financial statements); and
  5. selected explanatory notes.

Where an entity has presented a single statement of income and retained earnings in its most recent annual financial statements it is permitted to present such a statement in place of (2) and (3) above, provided the only changes to equity in the periods presented arise from profit or loss, payment of dividends, corrections of prior period errors or changes in accounting policies. 

If a complete set of financial statements is published in the interim report, those financial statements should be in full compliance with FRS 102.  If the financial statements are condensed, they should include, at a minimum, each of the headings and sub-totals included in the most recent annual financial statements and the explanatory notes required by FRS 104. Additional line-items or notes should be included if their omission would make the interim financial information misleading.

An interim financial report should include financial statements as follows:

  • A statement of financial position as of the end of the current interim period and a comparative statement of financial position as of the end of the immediately preceding financial year.
  • A single statement of comprehensive income or separate statements of income and of comprehensive income for the current interim period and, if different, cumulatively for the current financial year to date, with a comparative single statement of comprehensive income or separate statements of income and of comprehensive income for the comparable interim period (current and, if different, year-to-date) of the immediately preceding financial year.
  • A statement of changes in equity cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.
  • A statement of cash flows cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year, unless the entity is not required to present a statement of cash flows (see above).

If the company's business is highly seasonal, FRS 104 encourages disclosure of financial information for the latest 12 months, and comparative information for the prior 12-month period, in addition to the interim period financial statements.

Note disclosures

An entity shall include in its interim financial report an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period. Information disclosed in relation to those events and transactions shall update the relevant information presented in the most recent annual financial report.

Examples of specific disclosure requirements of FRS 104

Examples of events and transactions for which disclosures are required if they are significant 

  • write-down of inventories
  • recognition or reversal of an impairment loss
  • reversal of provision for the costs of restructuring
  • acquisitions and disposals of property, plant and equipment
  • commitments for the purchase of property, plant and equipment
  • litigation settlements
  • corrections of prior period errors
  • changes in business or economic circumstances affecting the fair value of financial assets and liabilities
  • unremedied loan defaults and breaches of loan agreements
  • related party transactions
  • changes in contingent liabilities and contingent assets.

Examples of other disclosures required [IAS 34.16A]

  • changes in accounting policies
  • explanation of any seasonality or cyclicality of interim operations
  • unusual items affecting assets, liabilities, equity, net income or cash flows
  • changes in estimates
  • issues, repurchases and repayment of debt and equity securities
  • dividends paid
  • particular segment information (where IFRS 8 Operating Segments applies to the entity)
  • events after the end of the reporting period
  • changes in the composition of the entity, such as business combinations, obtaining or losing control of subsidiaries, restructurings and discontinued operations
  • disclosures about the fair value of financial instruments

Accounting policies

The same accounting policies should be applied for interim reporting as are applied in the entity's annual financial statements, except for accounting policy changes made after the date of the most recent annual financial statements that are to be reflected in the next annual financial statements.

A key provision of FRS 104 is that an entity should use the same accounting policy throughout a single financial year. If a decision is made to change a policy mid-year, the change is implemented retrospectively, and previously reported interim data is restated.

In October 2020, the FRC amended FRS 104 to clarify the requirement to assess the going concern basis of accounting and require the disclosure of any related material uncertainties when preparing interim financial statements in accordance with FRS 104.

Measurement

Measurements for interim reporting purposes should be made on a year-to-date basis, so that the frequency of the entity's reporting does not affect the measurement of its annual results. 

Several important measurement points:

  • Revenues that are received seasonally, cyclically or occasionally within a financial year should not be anticipated or deferred as of the interim date, if anticipation or deferral would not be appropriate at the end of the financial year.
  •  
  • Costs that are incurred unevenly during a financial year should be anticipated or deferred for interim reporting purposes if, and only if, it is also appropriate to anticipate or defer that type of cost at the end of the financial year.
  •  
  • Income tax expense should be recognised based on the best estimate of the weighted average annual effective income tax rate expected for the full financial year.

An appendix to FRS 104 provides guidance for applying the basic recognition and measurement principles at interim dates to various types of asset, liability, income, and expense.

Materiality

In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality is to be assessed in relation to the interim period financial data, not forecast annual data.

Effective date

FRS 104 is effective for periods beginning on or after 1 January 2015. Early adoption is permitted if an entity also applies FRS 101 or FRS 102 for an accounting period beginning before 1 January 2015.  See above for effective dates of subsequent amendments to FRS 104.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.