The UK Financial Reporting Council (FRC) has published (on 14 March 2013) Financial Reporting Standard 102 (FRS 102) The Financial Reporting Standard applicable in the UK and Republic of Ireland. The FRC (and its predecessor the Accounting Standards Board) have been working towards this day for a number of years and the publication of FRS 102 is arguably more significant for the UK and Irish business community than the EU decision in 2002 to mandate the use of IFRS by EU listed entities.
FRS 102 is the third and most important of the trilogy of financial reporting standards that form new UK and Irish GAAP. The trilogy is:
New UK and Irish GAAP is mandatory for annual periods beginning on or after 1 January 2015 (but can be early adopted) and affords companies a number of options in relation to the accounting framework they use in preparing their financial statements. However, PwC expects the vast majority of Irish companies will decide to use FRS 102 to prepare their financial statements from the effective date.
Irene O’Keeffe, Partner, PwC Dublin said:
“We expect the vast majority of private Irish companies will use FRS 102 as the basis for preparing their financial statements from 2015. However, the decision on the most appropriate accounting framework is not an easy one and shouldn’t be taken lightly.”“A number of aspects of new UK and Irish GAAP are similar to current UK and Irish GAAP, however there are some areas of significant difference from current UK and Irish GAAP; two of which are defined benefit pension accounting and accounting for derivatives, both of which are a familiar feature of many Irish businesses.”
The process for developing FRS 100 to FRS 102 saw the FRC actively responding to comments received from UK and Irish business. Two noteworthy FRC responses include the publication of the FRS 101 IFRS reduced disclosure framework for subsidiaries and the inclusion in FRS 102 of more industry specific guidance, such as the investment entities guidance from IFRS.
Fiona Hackett, Technical Senior Manager, PwC Dublin said;
“Subsidiaries need to consider adopting FRS 101 as it provides them with an opportunity to prepare their statutory accounts using the IFRS numbers they use for group reporting without the requirement to include extensive IFRS disclosures in their statutory accounts.”
Sarah Murphy, Technical Director in PwC Dublin’s asset management practice, said:
“The approval and publication of FRS 102 is good news for the asset management industry. The new consolidation exemption for investment entities and the retention of the cash flow exemption are positive developments. Overall, new UK and Irish GAAP simplifies the existing guidance and provides an alternative to adopting full IFRS for certain entities within the asset management space.”
In summary, PwC welcomes the publication of new UK and Irish GAAP, as it provides a proportionate accounting framework encompassing the smallest entity to the largest subsidiaries of multi-nationals. The publication of FRS 102 may also provide the opportunity to simplify group structures or be the trigger for implementing an improved reporting process.
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