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The FRC issues amendments to FRS 102 and other financial reporting standards
Publication date: 28 Mar 2024
uk In brief UK2024-09
Key points
The FRC has issued amendments to FRS 102 and other financial reporting standards which are mostly effective for accounting periods beginning on or after 1 January 2026. These include:
- a new model of revenue recognition in FRS 102 and FRS 105, based on IFRS 15;
- a new model of lease accounting in FRS 102, based on IFRS 16; and
- various other incremental improvements and clarifications.
What is the issue?
The FRC has issued Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review 2024, concluding its second periodic review of the financial reporting standards. The amendments follow on from proposals published in FRED 82 and FRED 84.
What are the changes?
Section 20 of FRS 102 no longer distinguishes between operating and finance leases for lessees. Therefore, more leases will be required to be recognised on-balance sheet with an asset and liability. Exemptions will be permitted for short-term leases and leases of low-value assets.
Section 23 introduces a single comprehensive five-step model for revenue recognition for all contracts with customers, based on identifying the distinct goods or services promised to the customer and the amount of consideration to which the entity will be entitled in exchange. Similar amendments are made to FRS 105, with additional simplifications.
Other incremental improvements and clarifications to FRS 102 include:
- greater clarity for small entities in the UK applying Section 1A regarding which disclosures need to be provided in order to give a true and fair view;
- a revised Section 2 (Concepts and Pervasive Principles), updated to reflect the IASB’s Conceptual Framework for Financial Reporting, issued in 2018;
- a new Section 2A (Fair Value Measurement), replacing the Appendix to Section 2 and updated to reflect the principles of IFRS 13;
- new disclosures about supplier finance arrangements; and
- removal of the option to newly adopt the recognition and measurement requirements of IAS 39 to account for financial instruments (unless needed to achieve consistency with group accounting policies) in preparation for the eventual removal of this option; entities already applying the option can continue to do so in the meantime.
When does it apply?
The main effective date for the amendments is accounting periods beginning on or after 1 January 2026; early application is permitted, provided that all amendments are applied at the same time.
Earlier effective dates apply to:
- new disclosures about supplier finance arrangements – periods beginning on or after 1 January 2025, with early application permitted; and
- new requirement in Section 6 of FRS 103 relating to transition for insurance contracts – periods beginning on or after 1 January 2024.
What are the transition requirements?
Transitional provisions have been included for fair value measurement, disclosure of supplier finance arrangements, business combinations, leases, revenue from contracts with customers, and uncertain tax treatments.
Where do I get more details?
The FRC will be hosting a webinar to discuss the new standards on 15 May 2024.
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