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Developments by month 2012

On 2 July 2012 the FRC became the prescribed body for issuing accounting standards.
 
As part of the transitional provisions anything done by the ASB or in the process of being done by the ASB in relation to accounting standards is treated as being done by, or continued by the FRC. Documents originally published by the ASB, and decisions taken at ASB meetings, continue to be referred to as such below.

 
The following provides a review of the main issues discussed by the Accounting Council in considering the responses to FREDs 46 to 48. It provides an indication of the progress of the project, but decisions are not final until the Accounting Council has made its recommendations to the FRC Board, and the standards have been approved for issue by the FRC Board.

Any comments or queries on the progress of the project should be sent to Jenny Carter (j.carter@frc.org.uk).

Accounting Council meeting 6 December 2012

Exposure Draft - Amendment to FRED 48

The Accounting Council considered a summary of responses to the Exposure Draft Amendment to FRED 48 issued in October 2012.
The Accounting Council:

  • reaffirmed the proposal in the Exposure Draft relating to multi-employee defined contribution plans where the participants had entered into an agreement to fund a deficit;
  • agreed to clarify that the liability so recognised should be presented on the same line in the financial statements as other defined benefit scheme items; and
  • reaffirmed the proposals in the Exposure Draft in relation to service concessions.

SORPs

The Accounting Council tentatively decided to recommend to the FRC that any entity within the scope of a SORP should only be permitted to apply FRS 102 early providing it does not conflict with the requirements of a current SORP (ie that this restriction should apply to all SORPs, not just public benefit entity SORPs).

Insurance

The Accounting Council discussed how requirements for accounting for insurance contracts should be incorporated into FRS 102 (FRED 48 had included a cross-reference to the application of IFRS 4 Insurance Contracts). After considering the alternatives the Accounting Council tentatively decided to recommend to the FRC that a new accounting standard (tentatively entitled FRS 103 Insurance Contracts) should be developed from IFRS 4 and FRS 27 Life Assurance, which would be cross-referenced from FRS 102 and apply to insurance contracts.

Accounting Council meeting 15 November 2012

The Accounting Council tentatively agreed to recommend to the FRC that early application of FRS 102 should generally be available for accounting periods ending on or after 31 December 2012.

In relation to inventories held for distribution at no or nominal cost the Accounting Council tentatively decided to recommend to the FRC that:

  • Items such as promotional material can meet the definition of inventories held for distribution at no or nominal cost;
  • On initial recognition, such items will be recognised at cost, or in the case of donated items, fair value (which will be deemed cost for the purposes of subsequent measurement);
  • Subsequent to initial recognition, such items will be measured at cost adjusted, when applicable, for any loss in service potential.

In relation to the definition of a financial institution, the Accounting Council noted that by previously tentatively deciding to recommend to the FRC that ‘any other entity whose principal activity is to generate wealth or manage risk through financial instruments’ be included in the definition, it was extending the entities classified as financial institutions to include certain funds that were not caught by the definition of investment funds.

The Accounting Council deferred a discussion of accounting for insurance contracts/business to its next meeting.

FRC Board meeting 1 November 2012

The FRC Board agreed to issue FRSs 100 and 101. These standards are expected to be published, on the FRC website, later on during November.

Accounting Council meeting 25 October 2012

FRSs 100 and 101

The Accounting Council agreed to provide its advice to the FRC Board, recommending that FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework be issued. The FRC Board will consider the standards at its next meeting, with a view to approving them for issue.

In agreeing its advice, the Accounting Council considered the following final issues:

  • It confirmed its previous tentative decision that where, for a given item, a qualifying entity takes advantage of the disclosure exemptions in FRS 101 and:
    • although the parent entity has complied with the requirement to make equivalent disclosures, it has done so by making no disclosure because the item is not material in the group financial statements; and
    • the item is material to the qualifying entity; then the qualifying entity shall nevertheless make the disclosures in its financial statements.
  • To remove the disclosure exemptions in FRS 101 in relation to capital commitments because the requirements of company law will render those exemptions ineffective (the removal of these exemptions will not change the disclosures that will be made in practice).
  • To add a disclosure exemption from the comparative information to that required by paragraph 50 of IAS 41 Agriculture, consistently with the exemption from disclosing a comparative for the ‘fixed asset table’.
  • To remove the disclosure exemption from paragraph 33(b) of IFRS 5 Non-current assets held for sale and Discontinued operations, as a consequence of having confirmed previously that the company law formats must be complied with.

FRS 102

The Accounting Council considered a draft of its Advice to the FRC Board on FRS 102; no tentative decisions were taken.

Agricultural produce

The Accounting Council revisited the requirements of draft FRS 102 in relation to agricultural produce. The Accounting Council had previously tentatively decided to recommend to the FRC that it should permit an accounting policy choice, on a class by class basis, for biological assets, so that entities may choose between the fair value model and the cost model. However, both models require agricultural produce to be measured at the point of harvest, at fair value. The Accounting Council is minded to recommend to the FRC that a cost model should also be available, as an option, for agricultural produce.

Financial instruments

The Accounting Council considered the requirements of draft FRS 102 in relation to derecognition of financial assets. The Accounting Council noted that the requirements of draft FRS 102 have been deliberately simplified, when compared with IAS 39 Financial instruments: Recognition and measurement, but that in practice there should not be any significant differences in the accounting outcomes (taking into consideration the types of transactions entities applying FRS 102 are typically expected to enter into). It therefore tentatively decided to recommend to the FRC that no amendments be made to draft FRS 102 in relation to the derecognition criteria.

The Accounting Council noted that draft FRS 102 is silent on the accounting and/or reporting of financial guarantee contracts. The Accounting Council tentatively decided to recommend to the FRC that financial guarantee contracts should be defined in FRS 102, that they shall be accounted for in accordance with the requirements of Section 21 Provisions and contingences, and that intra-group financial guarantee contracts shall not be excluded from the scope.

Impact assessment

The Accounting Council considered a draft of the Impact Assessment to accompany the issue of FRSs 100, 101 and 102. No tentative decisions were taken.

Accounting Council meeting 4 October 2012

FRS 102

Insurance contracts

The Accounting Council considered the accounting for insurance contracts in accordance with draft FRS 102, and the timetable for other regulatory change. The Accounting Council tentatively decided to recommend to the FRC that the principles of IFRS 4 Insurance Contracts be included in a new part of Section 34 Specialised activities.

The Accounting Council also considered the future of FRS 27 Life assurance. It noted that, although some of the requirements of FRS 27 would become out-of-date as regulatory requirements change, the underlying rationale for the standard remains. The Accounting Council, therefore, tentatively decided to recommend to the FRC that a code or standard should be issued to replace FRS 27. If necessary this should also include any other requirements relevant to establishing a minimum benchmark for financial reporting by entities with insurance contracts.

Financial instruments

The Accounting Council considered the options for updating FRS 102 for the hedge accounting and impairment requirements of IFRS 9 Financial instruments, once that standard has been finalised by the IASB. The Accounting Council tentatively decided to recommend to the FRC that FRS 102 should be issued as currently proposed (subject to drafting amendments/improvements), and that supplementary Exposure Drafts amending Sections 11 and 12 of FRS 102 should be issued once the IASB completes each part of IFRS 9. The Accounting Council noted that, in due course, it may need to consider transitional provisions in relation to impairment.

The Accounting Council tentatively decided to recommend to the FRC that cross references to IAS 39 in Sections 11 of FRS 102 should be revised to be cross references to IAS 39 and/or IFRS 9.

Public benefit entity issues

The Accounting Council considered a proposed definition of a public benefit entity group, which would be relevant to the accounting for concessionary loans, and a revision to the definition of a public benefit entity concessionary loan, as follows:



Public benefit entity group A public benefit entity parent and all of its wholly-owned subsidiaries.
 
Public benefit entity concessionary loan A loan made or received by a public benefit entity or an entity within the public benefit entity group to another party:
• at below the prevailing market rate of interest;
• which is not repayable on demand; and
• which is for the purposes of furthering the objectives of the public benefit entity.
 
 
The Accounting Council reconsidered the restriction on early application of FRS 102 by public benefit entities. The Accounting Council tentatively decided to recommend to the FRC that early application of FRS 102 by public benefit entities should be permitted, subject to the following:

For public benefit entities that are subject to a SORP, early application is permitted providing it does not conflict with the requirements of a current SORP.

The Accounting Council has not yet reconsidered the general early application requirements of FRS 102.  FRED 48 restricted early application to periods beginning on or after the issue of the standard; the Accounting Council will reconsider this in due course, taking into account the feedback from respondents, a number of whom requested that any restriction on early application should be limited to periods ending on or after the issue of the standard.

Accounting Council Meeting 6 September 2012

Draft FRSs 100 and 101

The Accounting Council tentatively decided to recommend to the FRC some minor amendments to draft FRSs 100 and 101, including clarifying that entities applying the Reduced Disclosure Framework in FRS 101 must comply with company law format requirements.

Draft FRS 102

The Accounting Council reviewed its tentative decisions to date since responses to FREDs 46 to 48 were received.  In particular it reviewed those areas where it is proposed that draft FRS 102 departs from the IFRS for SMEs.  The Accounting Council noted that a number of the proposed departures were a consequence of its tentative decisions regarding the scope of FRS 102.
 
Employee benefits

The Accounting Council agreed to ask FRC staff to issue a Press Notice reminding entities within the scope of FRS 17 ‘Retirement benefits’ of certain disclosure requirements, relating to multi-employer schemes.

In addition, the Accounting Council tentatively agreed to recommend to the FRC that a limited scope Exposure Draft be issued proposing an amendment to draft FRS 102 addressing the accounting by employers participating in defined benefit multi-employer pension plans (this excludes group pension plans).  The amendment would be consistent with IAS 19 Employee benefits, and would require a liability to be recognised where there is an agreement to fund a deficit relating to past service, even though the scheme is otherwise accounted for as a defined contribution scheme.
 
Cash flow statement

The Accounting Council tentatively decided to recommend to the FRC that:
  • The exemption from preparation of a cash flow statement relating to open-ended investment funds should also be available to closed-ended investment funds;
  • Consistently with IAS 7 Statement of cash flows all entities should be permitted to report certain cash flows on a net basis;
  • Small companies choosing to apply FRS 102 instead of the FRSSE should not be exempt from preparing a cash flow statement.

Step acquisitions, step disposals and changes in stake

The Accounting Council tentatively decided to recommend to the FRC that the requirements of FRS 102 for step acquisitions, step disposals and changes in stake should be based on the requirements of IFRS 3 Business combinations (2004). This would involve a change from the IFRS for SMEs, but will be a coherent IFRS-based solution consistent with company law.
 
Definition of a financial institution

For the purposes of determining disclosure requirements under FRSs 101 and 102, the Accounting Council tentatively decided to recommend to the FRC the following definition of a financial institution (additions to the text are underlined):
“A financial institution is either:

  1. a bank which is:
  1. a firm with a Part IV permission which includes accepting deposits; and:
    1. which is a credit institution; or
    2. whose Part IV permission includes a requirement that it complies with the rules in the General Prudential sourcebook and the Prudential sourcebook for Banks, Building Societies and Investment Firms relating to banks, but which is not a building society, a friendly society or a credit union; or
  2. an EEA bank which is a full credit institution; or
    1. a building society which is defined in section 119(1) of the Building Societies Act 1986 as a building society incorporated (or deemed to be incorporated) under that Act; or
    2. an entity that undertakes the business of effecting or carrying out insurance contracts, including general and life assurance entities; or
    3. an investment trust, Irish Investment Company[2], venture capital trust, mutual fund, exchange traded fund, unit trust, open-ended investment company (OEIC), custodian bank or stockbroker; or
    4. a credit union, being a body corporate registered under the Industrial and Provident Societies Act 1965 as a credit union in accordance with the Credit Unions Act 1979, which is an authorised person; or
    5. an incorporated friendly society or a registered friendly society; or
    6. a retirement benefit plan; or
    7. a broker-dealer; or
    8. any other entity whose principal activity is to generate wealth or manage risk through financial instruments.  This is intended to cover entities that have business activities similar to those listed above but are not specifically included in the list. A parent entity whose sole activity is to hold investments in other group entities is not a financial institution.”

 
Public benefit entity issues

The Accounting Council tentatively decided to recommend to the FRC that:

  • public benefit entities only value donated services that would otherwise have been purchased, and on the basis of the value to the entity;
  • explanatory paragraphs for the definition of a public benefit entity are reintroduced into FRS 102;
  • public benefit entities disclose that they are a public benefit entity;
  • the disclosure requirements for combinations accounted for as mergers are revised to be consistent with FRS 6 ‘Acquisitions and mergers’, removing unintended onerous requirements;
  • the requirements for concessionary loans (ie that they may be accounted for at transaction value) can be extended to entities within a public benefit entity group.

Extractive activities

The Accounting Council tentatively decided to recommend to the FRC that the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources should be brought into FRS 102 by cross-reference, replacing the existing requirements of draft FRS 102.  This would allow entities in, for example, the oil and gas industries to broadly continue their existing accounting policies.
 
Service concession arrangements

The Accounting Council tentatively decided to recommend to the FRC that:

  • it is clarified that the scope of the service concession arrangements requirements is consistent with IFRIC 12 for operators, and also that as grantors may be within the scope of FRS 102, requirements should be set out for grantors;
  • amendments be made to FRS 102 to clarify the accounting by operators, which are based on IFRIC 12 and will reduce diversity in accounting practice;
  • accounting requirements be set out for grantors.  These will require a grantor, with control of the asset used to provide the services that are the subject of the service concession arrangement, to account for that asset as property, plant and equipment, and to measure the asset, and corresponding liability, on the basis of a finance lease model;
  • grantors of service concession arrangement should not receive any transitional exemptions on first-time application of FRS 102, and as a result FRS 102’s requirements will apply retrospectively.

The Accounting Council noted that the proposed requirements relating to grantors were a significant change from the current draft FRS 102 and therefore the Accounting Council tentatively agreed to recommend to the FRC that a limited scope Exposure Draft be issued proposing these amendments to draft FRS 102.
 
Other issues

The Accounting Council tentatively decided to recommend to the FRC that:

  • no amendment be made to draft FRS 102 in relation to renewals accounting (ie that renewals accounting would not be permitted);
  • FRS 102 should be amended to incorporate the principles of SIC 15 Operating lease – Incentives, and that transitional provisions should permit incentives to be accounted for prospectively;
  • transitional provisions relating to business combinations should be clarified, such that previously recognised goodwill is not adjusted on transition.


[1] As defined in section 40(4) of the Financial Services and Markets Act 2000.
[2] An Investment Company is a corporate vehicle formed under section 47(3) of the Companies (Amendment) Act 1983 and section 58 of the Companies (Amendment) Act 1986, and regulated by the Irish Central Bank.

Accounting Council meeting 26 July 2012

The Accounting Council considered issues relating to draft FRS 101 ‘Reduced disclosure framework’ and draft FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. The following identifies areas where the Accounting Council tentatively decided to recommend to the FRC a change from the proposals set out in FREDs 46 to 48. 

Cross-cutting issue – definition of a financial institution

The Accounting Council tentatively agreed to recommend to the FRC that broker-dealers be added to the list of financial institutions. 

Draft FRS 101

The Accounting Council tentatively agreed to recommend to the FRC that:

  • In general early application of FRS 101 should be permitted without restriction; it deferred discussion to a future meeting of the restriction for public benefit entities applying a SORP.
  • An amendment be made to clarify that disclosure exemptions are available for share-based payment arrangements concerning equity instruments in another group entity, but not where the equity instruments are of the entity itself.

The Accounting Council tentatively agreed to recommend to the FRC that financial institutions that are qualifying entities applying the reduced disclosure framework should be permitted disclosure exemptions relating to IFRS 13 Fair value measurement where they do not relate to financial instruments. 

Draft FRS 102

In respect of IAS 34 the Accounting Council tentatively agreed to recommend to the FRC that draft FRS 102 should no longer include a reference to the preparation of interim reports, but that instead the ASB Statement ‘Half-yearly financial reports’ should be revised, with a cross-reference to IAS 34.
 
The Accounting Council tentatively decided to recommend to the FRC that amendments be made in relation to the requirements for the formats for the statement of financial position and the income statement so that entities applying draft FRS 102 should have a choice between one of the following four formats:

  • those set out in Schedules 1, 2 and 3 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410); and
  • Schedule 1 of the Large and Medium-sized Limited Liability Partnership (Accounts) Regulations 2008 (SI 2008/1913).

The Accounting Council tentatively decided to recommend to the FRC that an analysis between continuing and discontinued operations on the face of the income statement/statement of comprehensive income should not be required for items included in other comprehensive income.
 
The Accounting Council considered the disclosures to be provided by a group including a financial institution, but where the parent entity is not a financial institution.  The Accounting Council tentatively decided to recommend to the FRC that where the financial institution subsidiary is material to the group the financial institution disclosures should be provided in the consolidated financial statements. The Accounting Council tentatively decided to recommend to the FRC that draft FRS 102 should include a fair value option so that investments other than those held in equities with a readily available market value may be held at fair value, subject to there being no legal issues or unintended consequences.
 
Concerns had been raised over the boundary between grants and donations (revenue from non-exchange transactions) and the Accounting Council tentatively decided to recommend to the FRC that the accrual method of accounting for grants should only be available for government grants rather than all grants, which would be consistent with the scope of IAS 20 Accounting for government grants and disclosure of government assistance on which it was based. Other grants should be accounted for using the performance method, which is also available as an accounting policy choice for government grants.
 
The Accounting Council tentatively decided to recommend to the FRC that draft FRS 102 should not provide an option to disclose the liability to pay pensions in the financial statements, but that disclosure should continue to be provided in the trustees’ report.
 
The Accounting Council considered a number of matters relating to taxation.  The Accounting Council tentatively decided to recommend to the FRC that:

  • No change be made to the requirements of draft FRS 102 regarding discounting of deferred tax balances, and that discounting should not be permitted.
  • Deferred tax arising on share-based payments where the cumulative expense recognised in profit and loss is less than the amount recognised for tax purposes, should be treated as a permanent difference and recognised where the related expense is recognised (as it is currently).
  • The disclosure of significant differences between the tax expense and the amounts reported to tax authorities should be replaced with a requirement to disclose a reconciliation between the tax expense or income and the profit or loss on ordinary activities before taxation multiplied by the applicable rate of tax.
  • The disclosure of expected significant differences between the tax expense and the profit or loss multiplied by the standard rate of tax, for the next three years, be replaced by a requirement to disclosure expected net reversals of deferred tax balances in the next year.

 In addition, following a discussion at an earlier ASB meeting, in considering an issue that has arisen in relation to FRS 17 ‘Retirement benefits’ the Accounting Council tentatively decided to recommend to the FRC that an additional paragraph be added to draft FRS 102, based on IAS 19.37.  This would require entities that participate in defined benefit multi-employer schemes (this excludes group schemes) that are accounted for as defined contribution schemes to recognise a liability where they have entered into an agreement to fund a deficit.

Accounting Council meeting 5 July 2012

The Accounting Council considered a number of issues in relation to FRED 48/draft FRS 102:

  • The principles and guidelines for amending the IFRS for SMEs in  developing FRS 102;
  • Accounting for biological assets;
  • Consolidation sweep issues, including accounting for ESOPs and EBTs;
  • Issues relating to reporting by pension schemes;
  • Revised definitions of performance-related conditions and restrictions in relation to income and liability recognition;
  • Requirements relating to considering going concern;
  • Insurance accounting.

The Accounting Council tentatively agreed to recommend to the FRC revised guidelines for amending the IFRS for SMEs, which increased consistency with its overarching objective and guidelines:

The Accounting Council’s guidelines for recommendation to the FRC when considering amendments to the IFRS for SMEs are:

  1. changes should be made to permit accounting treatments that exist in FRSs at the transition date that align with EU-adopted IFRS;
  2. changes should be consistent with EU-adopted IFRS unless a non-IFRS-based solution clearly better meets the objective of providing high-quality understandable financial reporting proportionate to the size and complexity of the entity and the users’ information needs.  In these cases elements of an IFRS-based solution may nevertheless be retained;
  3. use should be made, where possible, of existing exemptions in company law to avoid gold-plating; and
  4. changes should be made to provide clarification, by reference to EU-adopted IFRS, that will avoid unnecessary diversity in practice.

The Accounting Council tentatively agreed to recommend that the FRC permit an accounting policy choice, on a class by class basis, for biological assets, so that entities may choose between the fair value model and the cost model.  This will replace the requirement to use fair value where it is readily determinable without undue cost or effort.

The Accounting Council tentatively agreed to recommend to the FRC that ESOPs and EBTs should not be treated as subsidiaries, but that they should be accounted for consistently and in accordance with existing UK requirements.  As a result the assets and liabilities of an ESOP or EBT would be treated as assets and liabilities of the sponsoring entity.

The Accounting Council discussed issues relating to changes in the stake held in another entity, including step acquisitions and partial disposals.  It tentatively agreed to recommend to the FRC that in a partial disposal any remaining stake should not be revalued to fair value.  This would be a departure from the IFRS for SMEs and EU-adopted IFRS.  In relation to step acquisitions, the Accounting Council is minded to recommend that the FRC retain current UK accounting requirements, but asked the staff to review this issue further when it would reconsider its tentative decision.

The Accounting Council tentatively agreed to recommend that the FRC retain the IFRS for SMEs definitions of control, parent and subsidiary, whilst noting that in some circumstances this could be wider than the similar definitions in company law.  For example it would include SPEs within the requirements for consolidation, except that, as noted above, ESOPs and EBTs were outside the requirement to consolidate.

In relation to pension schemes, the Accounting Council tentatively reaffirmed the previous decision of the ASB, that pension schemes fall within the definition of a financial institution.  However, the Accounting Council tentatively decided to recommend to the FRC that pension schemes should not be required to comply with the disclosure requirements for financial institutions, and instead relevant financial instruments disclosures would be added to separate section on accounting and reporting by pension schemes.  Further the Accounting Council tentatively decided to recommend that the FRC delete the requirement for a defined contribution plan to provide a description of its funding policy.

The Accounting Council tentatively agreed to recommend to the FRC revised definitions of performance-related conditions and restrictions as follows:

Performance-related conditions

A condition that requires the performance of a particular level of service or units of output to be delivered, with payment of, or entitlement to, the resources conditional on that performance. 

Restrictions

A requirement that limits or directs the purpose for which a resource may be used which does not meet the definition of a performance-related condition.

The Accounting Council tentatively agreed to recommend to the FRC that no changes should be made to draft FRS 102 in relation to the consideration of going concern, either in relation to the disclosure requirements where significant uncertainties exist, or the period that must be reviewed in assessing going concern.

The Accounting Council tentatively agreed to recommend that the FRC adopt an interim position in relation to insurance accounting that:

  • IFRS 4 Phase II should be regarded as the long-term option for listed entities and qualifying subsidiaries (reporting under FRS 101); and 
  • a solution for companies applying FRS 102 should be considered once IFRS 4 Phase II was completed.

The Accounting Council also tentatively agreed to recommend that the FRC:

  • reaffirm the proposal to introduceIFRS 4 Phase 1 into FRS 102 in the short-term so that insurance companies would have to take into account the definition of insurance contracts in IFRS 4; and
  • review the accounting requirements in UK GAAP in the light of IFRS 4 Phase II once it was implemented.

The Council deferred a decision on whether FRS 27 would need to be retained in new UK GAAP or could be withdrawn.

Accounting Standards Board meeting 14 June 2012

The ASB considered a number of issues in relation to FRED 48/draft FRS 102:

  • Accounting for service concession arrangements;
  • Accounting for biological assets;
  • Whether to incorporate elements of IFRS 13 Fair value measurement into FRS 102;
  • Accounting for multi-employer pension schemes (excluding group schemes).
In relation to service charge concession arrangements the ASB tentatively decided to revise the definition of a service concession in FRS 102 to clarify that it is the same as in IFRIC 12 Service concession arrangements.  The ASB also tentatively decided to widen the scope of FRS 102 to include accounting by grantors in service concession arrangements, setting out the principles to be applied.

The ASB tentatively decided to amend the requirements in FRS 102 in relation to arrangements that contain leases.  To make it clear that certain arrangements may contain leases, rather than the current assumption that certain arrangements do contain a lease.

In relation to biological assets, the ASB deferred a tentative decision until the Accounting Council had reviewed its guidelines for amending the IFRS for SMEs.

The ASB tentatively decided that it would retain the definition of fair value that is currently set out in draft FRS 102, rather than align it with IFRS 13 (which some respondents had suggested).  However, it tentatively agreed that the cross-referencing within the standard, and guidance on applying fair value requirements should be reviewed to ensure that they are appropriate in a variety of situations where fair value may be applied.

The ASB tentatively decided that for multi-employer pension schemes, that are not group schemes, FRS 102 should be amended to ensure consistency with IAS 19 Employee benefits and to reflect its decision to amend FRS 17.

ASB meeting 24 May 2012

The ASB received an overview of the comment letters to FREDs 46 to 48.  The Board agreed that the comments provide support for it to continue with the proposals, broadly as set out in FREDs 46 to 48, but that many suggestions for drafting amendments have been received and will be reviewed.

The Board also tentatively decided to retain the objective “To enable users of accounts to receive high-quality, understandable financial reporting proportionate to the size and complexity of the entity and users’ information needs.”

The Board agreed to continue to cross-reference certain areas to EU-adopted IFRS, such as earnings per share (IAS 33), interim financial reporting (IAS 34) and segment reporting (IFRS 8).  It agreed to revisit the drafting of the scope in relation to IAS 34 and IFRS 8.

The Board noted respondents’ comments in relation to the definition of a financial institution and agreed to consider developing an overarching principle.  It also noted the feedback in relation to retirement benefit plans and agreed to consider this further in the context of the section addressing accounting and reporting by such plans.

The Board agreed to hold a future discussion on the accounting for agricultural activities.

The Board agreed that further work should be carried out on the requirements in FRS 102 in relation to service concessions and similar transactions.

The Board noted the high degree of support for retaining the company law exemption from disclosure of certain intra-group related party transactions.  It tentatively decided to retain the company law exemption in FRS 102.

The Board noted that feedback had been received on a number of issues relating to public benefit entities, including:
  • Definitions of restrictions and performance conditions
  • The boundary between grants and donations
  • Classification as public benefit entities
  • Concessionary loans
  • Funding commitments
  • Donated services.

It agreed that its Committee on Accounting for Public Benefit Entities should discuss these issues and report back to the Board.

The Board noted that some respondents suggested that FRS 102 should contain an option to discount deferred tax balances, which the Board agreed to consider further.  It also agreed to review the disclosure requirements in relation to deferred tax.

The Board noted concerns raised by some respondents around the timing of the expected issuing of IFRS 9 by the IASB and the potential implications for FRS 102.  The Board agreed to return to this issue in due course.

The Board tentatively decided that the project should proceed on the basis of an expected effective date of 1 January 2015.

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