Alan O’Connor reports on the latest version of standard for smaller entities.

In January, the ASB published updated version of the Financial Reporting Statement for Smaller Entities (FRSSE), the ‘FRSSE (effective January 2007)’.

The main feature to note is that the latest version includes a major simplification in terms of FRS 20 ‘Share-based payment’ where the ASB is requiring a disclosure only approach for equity-settled arrangements. This reflects the views of respondents to the Exposure Draft issued in April 2006, in which the Board had proposed that the FRSSE should require smaller entities to apply the key principles of FRS 20. Many respondents felt the requirements of FRS 20 were overly complex for smaller companies and that it would be costly for them to implement.

The Board discussed the issue at its meeting in December 2006 and concluded that the FRSSE should require a disclosure only approach as being more appropriate for smaller company financial reporting. The minutes of that meeting (available via the following link: http://www.frc.org.uk/asb/about/agenda.html) note that the arguments as to which approach should be adopted were finely balanced.

In updating the FRSSE, the ASB was advised by its Committee on Accounting for Smaller Entities. It also considered responses to the Exposure Draft. Other than including requirements for share-based payments, no other significant changes are being made. However to make the FRSSE a more manageable document, the derivation tables have been removed from the Appendices and are instead being made available on the ASB website (www.frc.org.uk/asb/technical/frsse).

The new FRSSE is effective for accounting periods commencing on or after 1 January 2007 and reflects the latest accounting standards and company law requirements. Early adoption is permitted although directors remain responsible for ensuring that accounts comply with legal requirements that may remain in force for earlier periods.