All change in UK Accounting rules: FRS 100, FRS 101 & FRS 102

It’s finally happened, FRS 102 is here! The new blueprint for UK accounting was actually finalised in March this year.

So how will things look going forward? When will everything change? And which organisations will be affected? All key questions that are revealed below.

What are the reporting requirements going forward?

The Financial Reporting Council (FRC) now has responsibility for setting and maintaining UK accounting rules following the disbanding of the Accounting Standards Board (ASB). All UK businesses will fall into one of the following categories:

1. Companies quoted on the Stock Exchange or AIM will use EU adopted IFRS

2. Companies that qualify as ‘small’ under UK accounting rules will follow the UK FRSSE

3. Companies not in categories 1 & 2 above will follow FRS 102

Just a couple of points here. The UK FRSSE users can voluntarily use FRS 102 or full IFRS if they wish. This would be extremely unlikely as the FRSSE is so simple and straightforward to use and of course it therefore means that it costs less to prepare and publish accounts using the FRSSE.

Secondly, companies in category 3 above could use full IFRS if they chose. Again this would be unlikely due to cost implications.

What is FRS 102?

FRS 102 is part of a set of 3 UK standards that were published in November 2012 and March 2013. The first of these was FRS 100. In a nutshell this standard did away with all the existing UK SSAPs & FRSs. For those amongst you who, like me, are old enough to remember these standards you will no doubt be feeling a welling up in the tear ducts at the thought of the departure of these old friends!

Not only does FRS 100 sweep away all existing UK standards but it also introduces the blueprint referred to in the previous paragraph for UK accounting in the future. It does this with the help of two other new standards, FRS 101 & 102.

FRS 101 first of all is a little bit of a side show. It simply allows UK companies whose parent produces full IFRS to produce its own accounts using IFRS with a whole raft of limitations on the level of disclosure. This would allow a UK subsidiary of, say, a German quoted parent that uses full IFRS for group accounts, to produce a simplified version of IFRS accounts with limited disclosures on Property, Plant & Equipment, Financial Instruments and many other items.

We then have the main man of the moment, FRS 102. This standard is a one stop shop standard for UK companies that don’t use IFRS or the FRSSE. The document is about 350 pages long and covers every aspect of reporting. It is based on the IFRS for Small & Medium Entities so uses international language: words & phrases like ‘Statement of Financial Position’ rather than ‘Balance Sheet’, ‘Non Current Assets’ rather than ‘Fixed Assets’ and so on. I would describe the document as ‘the FRSSE for medium sized companies’.

The thing with FRS 102 is that the FRC didn’t want UK companies to just adopt the IFRS for Small & Medium Entities. They wanted something ‘uniquely British’.

So FRS 102 is different to the UK GAAP that went before. It has far fewer disclosure requirements for a start and also has some accounting substantive accounting differences as well. And FRS 102 is also different to the IFRS for Small & Medium Entities in that it allows things such as the capitalisation of development expenditure.

When it is used by UK companies it should make reporting much quicker and easier for users. Accountants will just have to get used to the differences first.

When will this all happen?

The standards are already published and they can be early adopted by organisations as soon as they wish. The mandatory date for adoption is the accounting date starting after 1 January 2015. This seems like a long time away, but remember, in the first set of accounts you will need comparative figures under the new rules. So, if you have a December year end, then you will need to start using FRS 102 for your 2014 accounts at least to shadow your current accounts as you will need FRS 102 figures for 2014 to go in your 2015 statements.

There’s clearly a lot to think about for most organisations and the start of 2014 is only 8 months away as I write.

If you would like help with understanding the impacts of FRS 102 and the new regime, contact me on [email protected]