Financial Reporting

FRS 102 and its First Triennial Review

When FRS 102 was introduced in March 2013 and became effective for the 1 January 2016. The standards at the time were designed to make financial reporting for UK entities more consistent with IFRS (‘International Financial Reporting Standards’) and easier to digest. The first set of standards issued in September 2015 were relatively short compared to IFRS with only 384 pages. Since then businesses have been busy applying these new standards and getting accustomed to the guidance issued by the Financial Reporting Council (‘FRC’).

The FRC is consistently improving FRS102. However, the intention was to review the standards once every three years as this would give companies a chance to get used to applying the standards, and also allow the FRC to apply incremental improvements on a periodic basis. This process was later known as the triennial review.

The first triennial review was issued in December 2017 and focused mainly on incremental changes. Some of the changes that took my interest were as follows:

  1. Making the measurement of directors’ loans more straightforward following the introduction of interim relief in 2017.
  2. Relaxing the requirement for the decoupling of intangibles from goodwill in a business combination.
  3. Allowing rented property between groups to be valued at cost less depreciation and any impairment rather than fair value.
The interesting thing is that the triennial review did not consider any of the substantial changes introduced in IFRS; for example lFRS 16: Leases. A large number of corporates are already considering the impact this has on their balance sheet. On the other hand, FRS 102 reporting entities do not have to consider the effect this has on their financial statements and management accounts just yet. The FRC has decided that any of the major changes introduced to IFRS will be delayed for adoption in FRS 102 until 1 January 2022 at the earliest. The rationale behind this is to ensure that entities have time to consolidate their knowledge of applying the standards before any major changes are introduced.