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News June 2017 FRC defers decision on updating FRS 102 for major changes in IFRS

FRC defers decision on updating FRS 102 for major changes in IFRS

30 June 2017

Today the Financial Reporting Council (FRC) published a feedback statement (PDF) summarising respondents’ comments to its Consultation Document on updating FRS 102 for changes in IFRS. The statement also sets out the FRC’s revised approach.

The Consultation Document was issued in September 2016 and asked for views on whether FRS 102 should be kept up to date with IFRS as IFRS changes, particularly in relation to major new standards that have been issued, and provided an outline timetable for possible changes in relation to financial instruments, revenue and leases.  Respondents’ feedback showed support for a long‑term aim of broad consistency with IFRS, but questioned the proposed timetable and suggested more IFRS implementation experience is needed before an assessment of whether, and if so, how and when requirements based on these standards should be considered for incorporation into FRS 102.

The FRC agrees that further evidence-gathering and analysis needs to be undertaken before any proposals to reflect the principles of the expected loss model of IFRS 9, IFRS 15 and IFRS 16 in FRS 102 could be made.  Therefore, the FRC will not be issuing a triennial review phase 2 exposure draft later this year.

IFRS 17 has been issued since this consultation took place.  The FRC has previously said that FRS 103 would be reviewed once the IASB had completed IFRS 17.  The FRC still intends to review FRS 103 at a suitable time, but consistently with the approach to other major new IFRS, this is likely to take place once more IFRS implementation experience is available.

At present no target effective date for any changes to FRS 102 or FRS 103 has been set and any detailed proposals will be consulted on in due course.

Notes to editors:

1.The following documents are referred to above:

a) Consultation Document Triennial review of UK and Ireland accounting standards – Approach to changes in IFRS;
b) FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland;
c) IFRS 9 Financial Instruments;
d) IFRS 15 Revenue from Contracts with Customers;
e) IFRS 16 Leases;
f) IFRS 17 Insurance Contracts; and
g) FRS 103 Insurance Contracts.
 
2.         The Consultation Document proposed that more significant amendments would be made to FRS 102, to be effective from 1 January 2022.  These amendments would:

a) incorporate the expected loss model for impairment of financial assets, based on IFRS 9; and
b) update lease accounting by lessees for consistency with IFRS 16.

The detailed proposals were to have been set out in a phase 2 FRED to be issued towards the end of the third quarter of 2017.
 
3.         In addition to the triennial review and any projects to update FRS 102 for major changes in IFRS, the FRC will continue to assess emerging issues as they arise to determine whether action needs to be taken, and if so, in what form and when.  When necessary this will continue to include issuing amendments to standards outside regular review cycles.

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