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The Triennial Review of FRS 102

Stuart Brown | 18 February 2019

Changes resulting from the triennial review made to FRS 102 are mandatory for accounting periods beginning on or after 1 January 2019.

Numerous changes have been made however several changes could potentially have a significant impact on the preparation and audit of financial statements using FRS 102 and are discussed below.

Tax effects of gift aid payments

Gift aid payments made by wholly owned subsidiaries to their charity parents must be treated as distributions. The triennial amendment to FRS 102 allows for the tax effects of such future payments to be taken into account at the reporting date i.e. the subsidiary will not have to show a tax charge against taxable profits that are to be gift-aided to their charitable parent.

Loans

Smallentities - long-term interest-free loans granted by a person within a director's group of close family members that includes at least one shareholder in the entity now have the option to record the loan at transaction price, not the discounted value. This will avoid the complex requirement of using and justifying a suitable interest rate to discount the loan.

Investment property

Previously FRS 102 required all investment property to be held at fair value through the profit or loss, including property that an entity rented to another group company.

In the case of investment property where an entity rents that property to another group entity, an accounting policy choice has been introduced - the property can now either carry the property at fair value through profit or loss, or the investment property can be carried at cost less depreciation and impairment.

Other

Other areas to note include business combinations and the definition of intangible assets and the specific definition of a financial instrument.

Large company reporting requirements

New legislation 'Companies (Miscellaneous Reporting) Regulations 2018' is effective for accounting periods beginning on or after 1 January 2019.

The highlights of the changes include:

  • Large companies (companies act definition) are required to include a statement as part of their strategic report describing how the directors have had regard to the matters in section 172(1)(a) to (f) of the Companies Act 2006 covering how directors have considered broader matters when performing their duty to promote the success of the company.
  • Companies with more than 250 UK employees are required to include a statement as part of their directors' report summarising how the directors have engaged with employees.
  • Large companies (companies act definition) are required to include a statement as part of their directors' report summarising how the directors have had regard to the needs of stakeholders.
  • Very large private (One of either 2,000 employees or turnover of over £200m AND a balance sheet of over £2bn) and public unlisted companies are required to include a statement as part of their directors' report stating which corporate governance code, if any, has been applied and how.

For further details of the changes highlighted above please contact us.

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