UK implements revised differential reporting regime

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23 Nov 2012

The United Kingdom Financial Reporting Council (FRC) has issued two new standards which implement a revised differential reporting regime for UK companies. The new regime introduces a 'reduced disclosure regime' for individual financial statements of subsidiaries and ultimate parents.

The move toward a new differential reporting regime has been a long and controversial process in the United Kingdom, with a consultation process on the future of financial reporting in the UK and Republic of Ireland taking place between 2002 and 2012.

The effect of the changes is that more financial reporting will be based on IFRSs. In announcing the publication of the standards, the FRC commented:

By using an international-based framework all entities, and users, will be using the same accounting language regardless of size, but a proportionate approach to disclosure aims to meet users’ information needs, without imposing undue reporting burdens.

The two new standards are as follows:

  • FRS 100 Application of Financial Reporting Requirements - sets out the overall financial reporting requirements, giving many entities a choice of detailed accounting requirements depending on factors such as size, and whether or not they are part of a listed group
  • FRS 101 Reduced Disclosure Framework - applies to the individual financial statements of subsidiaries and ultimate parents, allowing them to apply the same accounting as in their listed group accounts, but with fewer disclosures.

These standards will be followed by a third standard, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, which is expected to be issued in 2013.

The Financial Reporting Standard for Smaller Entities (FFSSE) is also amended by the standards and will remain in force under the new regime.

The new requirements will be effective from 1 January 2015, but may be adopted early.

Click for press release (link to FRC website).

Deloitte (United Kingdom) has also published an edition of its iGAAP Alert discussing the changes in more detail.

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