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CFM23015 | New UK GAAP: FRS 102: history of FRS 102

From HM Revenue & Customs · Corporate Finance Manual

New UK GAAP is the term used by this manual to refer to the collection of UK standards: FRS 100 to FRS 105 as detailed at CFM20010. This section focuses on the requirements of FRS 102.

Origins of FRS 101

FRS 101 “Reduced Disclosure Framework’’ was issued in November 2012. It brings the recognition and measurement requirements of IFRS into New UK GAAP (albeit with a few amendments for company law). For purposes of this manual references to IAS 32 and IAS 39 or IFRS 9 will apply to users of FRS 101 unless otherwise stated.

It is expected that FRS 101 will be updated annually for changes to IFRS.

Origins of FRS 102

FRS 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland” is the result of a number of years of work and consultation about how UK GAAP was going to be updated.

Issued in March 2013, FRS 102 is available to all entities other than those that are required to prepare accounts in accordance with IFRS. It was updated in August 2014 in particular in relation to the classification and hedging requirements regarding financial instruments.

FRS 102 is derived from the IFRS for SMEs with adjustments made to ensure compliance with UK company law and to incorporate additional accounting options. In certain areas of accounting it represents a significant change to Old UK GAAP.

It is expected that FRS 102 will be reviewed every three years. The first three year review was completed in 2017 with the changes brought in by the triennial review being effective from 1 January 2019. The main changes brought in by the triennial review relevant for financial instruments are as follows:

  • The introduction of an additional description of a basic financial instrument to support the detailed conditions for classification as basic. This will allow a small number of financial instruments that breach the detailed conditions for a basic classification to be classified as basic where the new description is met.

  • For small entities, the allowance for a loan from a director (or a person within a director’s group of close family members) that includes at least one shareholder in the entity, to initially measure the loan at transaction price rather than present value.