The simplification of UK generally accepted accounting principles (GAAP) will benefit up to four million businesses, the Financial Reporting Council (FRC) has said.
The news follows the planned triennial review of FRS 102 and the resulting incremental improvements and clarifications.
The package of measures will simplify the measurement of directors’ loans to small entities following the interim relief granted earlier this year.
Paul George, Executive Director, Corporate Governance & Reporting, said: “We are grateful for stakeholders’ engagement with the triennial review, which has enabled us to identify and respond to implementation issues following the introduction of FRS 102 from 2015. As a result of these amendments, FRS 102 has been simplified and will be more cost-effective and easier to use.”
The package of amendments also includes:
- require fewer intangible assets to be separated from goodwill in a business combination;
- permit investment property rented to another group entity to be measured by reference to cost, rather than fair value;
- expand the circumstances in which a financial instrument may be measured at amortised cost, rather than fair value; and
- simplify the definition of a financial institution.
Amendments have also been made to provide relief from recognising tax payable when a trading subsidiary expects to make a distribution of a gift aid payment to its charitable parent.
The amendments must be adopted for accounting periods beginning on or after 1 January 2019, with early application permitted provided all amendments are applied at the same time. The only exceptions to this are the amendments relating to directors’ loans and the tax effects of gift aid payments, for which early application is permitted separately. It should be noted that there are only limited transitional provisions available.
What are the implications?
These amendments may have an effect on the following accounting principles:
- FRS 100 Application of Financial Reporting Requirements 129
- FRS 101 Reduced Disclosure Framework 132
- FRS 103 Insurance Contracts 136
- FRS 104 Interim Financial Reporting 139
- FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime
The impact of the changes for micro-entities in the UK and the Republic of Ireland (as set out in FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime) are applicable to accounting periods beginning on or after 1 January 2017. This area will be covered in a later blog.
