By Daniel Hunter
The Financial Reporting Council (FRC) has published FRS 102, the new accounting rule replacing existing UK accounting standards from 1 January 2015, a change that will affect around 50,000 UK companies.
The move will see the accounting rule book slimmed down by almost 90% in a bid to ease costs of transition for companies battling the current financial climate.
As a result of feedback during the exposure draft process FRS 102 is in most respects similar to the current UK Generally Accepted Accounting Principles (GAAP). However, the most significant change for many will be the requirement for companies to recognise and measure financial instruments (previously optional).
“The FRC has completed its reporting framework for UK entities with the publication of FRS 102, having listened to the positive comments that we, business and other interested parties made around the original proposals for updating UK accounting," Iain Selfridge, partner, PwC, said.
"In particular, we welcome the fact that FRS 102 incorporates many aspects of previous UK GAAP that will minimise the effort involved for many companies moving to the new framework.
“Now that we have certainty over the choices available to UK entities they will be able to consider the most appropriate course of action by evaluating the impact of taxation, distributable reserves, bank financing requirements and system requirements.
“The goalposts are fixed and the clock has started ticking. Two years sounds a long time to prepare but those who evaluate their options now will be better placed to implement their plans in a way that minimises disruption to the business and maximises the benefits. Early conversion may also provide the opportunity to simplify group structures and associated costs, or be the trigger for implementing an improved reporting process.”
The FRC changes have a sensible lead time before they become effective. This gives UK businesses more room to consider the implications of moving to the new framework, to plan their transition and to identify the opportunities and risks that for most UK entities constitute a broad change agenda stretching into 2015. Years beginning on or after 1 January 2015 will be the earliest affected although early adoption will be permitted.
“The FRC has achieved the tricky task of modernising UK GAAP while keeping the cost burden for companies to a minimum," Iain Selfridge, partner, PwC, added.
"Providing a sensible framework encompassing the smallest entity to the largest listed multi-national is welcomed. Those that wish to embrace the complexity of full IFRS may do so while those that wish to apply a framework more suited to their needs may apply FRS 101 or FRS 102.”
Join us on