CFM64015 | Foreign exchange: accounts drawn up in a foreign currency: accountancy rules

For periods from 1993 to 2004, the UK GAAP rules relating to accounting for exchange differences were in Statement of Standard Accounting Practice (SSAP) 20. From 2005, certain companies were required, and others might choose, to apply International Accounting Standard (IAS) 21 or its UK GAAP equivalent FRS 23 in accounting for foreign currency transactions.

For company periods of account beginning on or after 1 January 2015 major changes were made to UK GAAP and SSAP 20 could no longer be used.

In single entity accounts most UK companies, other than micro-entities, will now normally apply FRS 102, ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’, a new UK standard that replaced all earlier standards. Its approach is closely aligned with International Financial Reporting Standards (IFRS), though it is less detailed. The main alternatives to FRS 102, for UK companies, are (i) International Accounting Standards as adopted by the EU (required for certain companies), (ii) FRS 101, which is similar to IAS, but with a reduced disclosure framework or (iii) in the case of micro-entities which satisfy the necessary conditions, the very much simpler FRS 105, ‘The Financial Reporting Standard applicable to the Micro-entities Regime’.

The current position is that UK companies, with the possible exception of micro-entities applying FRS 101, will account for exchange differences in a manner essentially consistent with the IFRS IAS 21.

For more on accounting for foreign currency translation, see CFM64110.