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FRED 82 – launch webinar slides
Overview of FRED 82
At a glance
Periodic Review
- Second periodic review of FRS 102 and other FRSs commenced March 2021 with request for views
- FRED 82 proposes amendments for public comment
- Financial Reporting Council has considered:
- Changes to IFRS Accounting Standards
- Changes proposed for third edition of IFRS for SMEs Accounting Standard
- Stakeholder feedback in response to request for views
- Other developments in corporate reporting
Proposed amendments and impact assessment
- The proposed amendments:
- Update accounting requirements to reflect changes in IFRS Accounting Standards, including:
- Revenue
- Leases
- Make other incremental improvements and clarifications
- Update accounting requirements to reflect changes in IFRS Accounting Standards, including:
- Comments invited on all aspects of the draft amendments and on the consultation stage impact assessment
- Invitation to comment sets out 10 particular questions
Effective date and comment deadline
- The proposed effective date is accounting periods beginning on or after 1 January 2025
- The comment deadline is 30 April 2023
Navigating the FRED
FRED 82 is structured as:
A flow diagram illustrating the structure of FRED 82. It starts with "Overview of FRED 82 (2 pages)" and proceeds through a series of stages: 1. Invitation to comment * 4 pages * See also page 345 2. Draft amendments to FRS 102 * 184 pages * Grouped by section * See also Staff Draft 3. Draft amendments to other FRSs * 54 pages * Grouped by standard 4. Basis for Conclusions * 28 pages * Summary of main issues considered * Part A: general issues * Part B: specific technical issues 5. Consultation stage impact assessment * 66 pages * See also Q&As
Proposed amendments
Summary of proposed amendments
A hexagonal diagram showing "Proposed amendments" in the center. Surrounding it are other hexagons labeled: * Revenue * Leases * Conceptual Framework * Fair Value * Small entity disclosure * Other II&C (Incremental Improvements & Clarifications)
Proposed amendments – revenue from contracts with customers
Why align FRS 102 with IFRS 15?
- Five-step model developed to provide single comprehensive framework and more useful information to users.
- Effective since 1 January 2018 for IFRS preparers.
- Request for views feedback generally supported incorporating new model, providing done in a proportionate manner.
- Expected to result in more reliable reporting and increase comparability between entities.
Making the IFRS 15 model proportionate for FRS 102 preparers:
- Simpler language; more succinct drafting (structured around five steps)
- Minimise mandatory GAAP diffs to promote efficiency in groups
- Account for time value of money on payments in arrears
- Simplified transition with extended practical expedients
- Accounting policy choice for costs to obtain a contract
- Simplified accounting for contract modifications
- Simplified requirements for allocation of a discount
- Simplified decisions re. agent/principal; customer put options
- Simplified decisions re. licences (right to use / access)
Why align FRS 105 with IFRS 15?
- Consistency across all financial reporting frameworks.
- Comprehensive up-to-date model for all entities.
- Further adaptations and simplifications appropriate for micro-entities.
Note: Consequential amendments also proposed to FRS 103 and its Implementation Guidance.
Proposed amendments – leases
Why align FRS 102 with IFRS 16?
- On-balance sheet model developed to provide more faithful representation of leasing transactions and more useful information to users.
- Lessees recognise assets and liabilities for leases.
- Effective since 1 January 2019 for IFRS preparers.
- Request for views feedback generally supported new model, providing that simplifications could be offered.
- Expected to result in more relevant, improved information to users and increase comparability between entities.
Note: FRED 82 does not contain proposals to align FRS 105 with IFRS 16.
Making the IFRS 16 model proportionate for FRS 102 preparers:
- Simplified structure: Application Guidance included in main body
- Minimise mandatory GAAP diffs to promote efficiency in groups
- Discount rate: 'OBR' option; gilt rate backstop
- Mandate simplest transition method; permit IFRS 16 numbers
- Simpler AP choice available for sale and leaseback accounting
- Fewer modifications require new discount rate
- Index/rate-driven variations in lease payments permitted to stay off-BS
- 'Low value' based on value at start of lease; more examples given
- Practical expedients for multi-component contracts
Other amendments based on IFRS developments
Updates to Section 2 Concepts and Pervasive Principles
- A revised Section 2 of FRS 102 and FRS 105, updated to reflect the IASB's Conceptual Framework for Financial Reporting, issued in 2018.
- To support Financial Reporting Council principles of:
- Seeking up-to-date IFRS-based solutions
- Consistent principles for accounting by all entities
- Simplified wording compared with IASB proposals.
Updates to Section 2A Fair Value Measurement
- A new Section 2A of FRS 102, replacing the Appendix to Section 2.
- Definition of fair value revised based on IFRS 13 definition (effective 2013).
- More comprehensive guidance on fair value measurement.
- Fair value disclosure requirements not proposed to be centralised in Section 2A.
Small entity disclosure requirements
Section 1A (UK entities)
- No change in requirement to give a true and fair view
- No change in legally-required minimum disclosures (Appendix C and *)
- Additional disclosures now specifically identified as required (Appendix C and +)
- No longer any 'encouraged' disclosures (Appendix E)
Section 1A (Republic of Ireland entities)
- No change in requirement to give a true and fair view
- No change in legally-required minimum disclosures (Appendix D)
- No change in 'encouraged' disclosures (Appendix E)
Other incremental improvements and clarifications
Selected highlights
- Section 3: Positive statement re. GC basis application and consideration of future
- Section 11/12: Removal of IAS 39 option (unless already taken)
- Section 19: Identifying the acquirer
- Section 19: Consideration vs. remuneration
- Section 19: Additional disclosure requirements
- Section 26: Measurement of cash-settled SBP
- Section 26: SBP with cash alternatives
- Section 29: Uncertain tax treatments (IFRIC 23)
Next steps
Next steps
A flowchart illustrating the next steps for FRED 82: 1. Consultation * Public consultation on the FRED Jan-Apr 2023 2. Redeliberation * FRC considers consultation responses received 3. Final amendments * FRC issues final amendments 4. Implementation * Entities prepare to apply new requirements * Not less than 12 months to implement 5. Effective date * Final amendments effective 1 Jan 2025 (subject to consultation responses)
Invitation to comment
Comments are invited in writing on all aspects of the draft amendments.
In particular, comments are sought in relation to the questions below:
- Q1: Disclosure
- Q2: Concepts and pervasive principles
- Q3: Fair value
- Q4: Expected credit loss model
- Q5: Other financial instruments issues
- Q6: Leases
- Q7: Revenue
- Q8: Effective date and transitional provisions
- Q9: Other comments
- Q10: Consultation stage impact assessment
Find out more and have your say
To find out more, visit our FRED 82 webpage at frc.org.uk/FRED82, where you can:
- Read FRED 82, the Staff Draft of FRS 102, and the Q&As on the consultation stage impact assessment
- Listen to our podcast discussing FRED 82
- Register for our roundtable events, including topic-specific sessions (coming soon)
- Complete a short survey to help inform our outreach
To stay up to date with this and other Financial Reporting Council developments:
- Subscribe to our newsletters and alerts at frc.org.uk/sign-up
To have your say on our proposals:
- Send your comments to [email protected] by 30 April 2023
"The publication of FRED 82 is a significant milestone in the continuing evolution of UK and Ireland financial reporting standards, and we look forward to receiving stakeholders' responses to the proposed amendments.”
Mark Babington Executive Director of Regulatory Standards
Q&A
A large white question mark rests on a wooden floor against a grey wall.
Any questions?
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