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The Financial Reporting Council (FRC) has published the first part of the new reporting framework that will replace the UK GAAP
The implementation of FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework becomes mandatory from January 2015.
Early adoption is allowed, meaning that companies with a December 2012 year-end can adopt the standards from today if they are prepared.
FRS 101 introduces a reduced disclosure framework for subsidiaries using or contemplating IFRS, useful for those which are member of a group that already reports using IFRS that may already be preparing IFRS statutory accounts for the separate subsidiary accounts.
The reduced disclosure framework will also allow UK subsidiaries to ‘trade up’ to IFRS accounting, but still take advantage of the disclosure exemptions of FRS 101.
FRS 100 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
The new standards are issued as part of the FRC’s fundamental reform of existing accounting standards.
Roger Marshall, FRC board member and chair of the Accounting Council, said, “I am pleased that, after a long period of development involving extensive consultation with preparers and users, we have issued FRS 100 and FRS 101, which set out a clear and proportionate framework for financial reporting in the UK and Republic of Ireland.
"Respondents asked us for a reduced disclosure framework, principally so that subsidiaries within groups reporting in accordance with EU-adopted IFRS could use the same reporting principles as the group, but with reduced disclosures, given the often limited use for those financial statements. This will result in cost savings for those groups.”
The FRC said it has taken into account many years of feedback to issue the first set of accounting standards that will simply accounting and reporting for unlisted entities, improve reporting of financial instruments and provide cost savings for subsidiaries of listed groups.
Iain Selfridge, partner at PwC, has warned companies to “look before they leap” if they consider early adoption of the new reporting standards.
“There may be cost savings for companies that choose to adopt IFRS or new UK GAAP and there may be advantages for those electing to adopt the reduced disclosure framework,” said Selfridge. “The early adoption provisions give a great deal of flexibility in the timing of moving into the new regime by January 2015, but businesses need to look before they leap.
"Companies will have to assess their group structure and consider the appropriate reporting options for each subsidiary, balancing the needs of financial statements users against the potential cost savings from preparing reduced disclosures.
There are a myriad of factors to consider for companies that move to full IFRS or adopt FRS 101 early. Cash tax position, distributable reserves and XBRL (online accounts) tagging requirements may all be affected. Companies that fail to adequately prepare could find moving to a new accounting framework is more costly and time- consuming than they anticipated. The effort involved shouldn’t be underestimated.”
FRS 102 The Financial Reporting Standard will complete the suite of new financial reporting standards, and will be issued by the FRC in early 2013.
Source: Economia
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