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Feedback Statement and Impact Assessment – Amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle

The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from an omission from it.

© The Financial Reporting Council Limited 2025

The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 13th Floor, 1 Harbour Exchange Square, London, E14 9GE

Contents

Executive Summary

(i)The Financial Reporting Council’s (FRC) overriding objective in setting accounting standards is 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. FRS 101 is an optional reduced disclosure framework that is intended to enable cost-effective financial reporting within groups, particularly those applying IFRS Accounting Standards in their consolidated financial statements.

(ii)In December 2024, the FRC issued FRED 86 Draft amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle, which proposed amendments related to developments in IFRS Accounting Standards, notably new standards IFRS 18 Presentation and Disclosure in Financial Statements and IFRS 19 Subsidiaries without Public Accountability: Disclosures. The FRC received ten responses to FRED 86, from accountancy firms, accountancy professional bodies, and an individual.

(iii)Overall, respondents agreed with the proposals in FRED 86. Several respondents provided further comments on points of detail. The FRC has considered this stakeholder feedback in finalising the amendments to FRS 101 and made amendments to the proposals, including to provide further exemptions from disclosure requirements of IFRS Accounting Standards.

(iv)In May 2025, the FRC issued Amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle, finalising the proposals set out in FRED 86.

(v)Overall, the FRC believes that FRS 101, as a reduced disclosure framework, will continue to have a positive impact on the cost-effectiveness of the preparation of financial statements.

1. Introduction and background

1The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work.

2The FRC’s overriding objective in setting accounting standards is 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.

3FRS 101 Reduced Disclosure Framework is an optional standard that is intended to enable cost-effective financial reporting within groups, particularly those applying IFRS Accounting Standards in their consolidated financial statements. Therefore, it is only applied by those qualifying entities that consider it a cost-effective option for the preparation of their individual financial statements.

4The FRC issued FRED 86 Draft amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle on 13 December 2024, with the comment period closing on 7 March 2025.

5The FRC received ten responses to FRED 86. Copies of the responses received to FRED 86 can be found on the FRC website, unless the respondent requested confidentiality.

6The table below sets out the number and category of respondents to the consultation.

Table 1: Category of respondent

Category of respondent Number
Accountancy firms 6
Accountancy professional bodies 3
Individual 1
Total 10

2. Summary of Responses

Responses to the public consultation

7The purpose of this Feedback Statement is to summarise the comments received in response to FRED 86, and the FRC’s response to them.

8In analysing the responses, judgement has been applied in categorising the comments.

9FRED 86 posed six questions. The feedback and the FRC’s response are summarised below.

Question 1(a): Management-defined performance measures

Amendments are proposed to exempt most qualifying entities from the disclosure requirements in IFRS 18 related to management-defined performance measures. Do you agree with these proposed amendments? Why or why not?

Table 2: Summary of responses to question 1(a)

Category of response Number
Agreed 7
Agreed with reservations 2
Disagreed 1
Total 10

10All but one respondent agreed with the proposal to exempt most qualifying entities from the disclosure requirements in IFRS 18 related to management-defined performance measures (MPMs). One respondent disagreed with the proposal to limit the availability of the exemption and two other respondents had reservations about that part of the proposal, mainly because they thought the exempted entities would be unlikely to have management-defined performance measures.

FRC response

11FRED 86 proposed to insert paragraph 7ZA into FRS 101, which would have made the exemption from the disclosure requirements in IFRS 18 related to management-defined performance measures unavailable to a listed qualifying entity1 that does not itself prepare consolidated financial statements. In response to the feedback received, the FRC has not inserted paragraph 7ZA. The outcome of the final amendments is that all qualifying entities will be exempt from those disclosure requirements.

12As set out in paragraph 61M of the Basis for Conclusions to FRS 101, the FRC considered that the cost of requiring all qualifying entities to consider whether they have MPMs would not be outweighed by the benefits because few qualifying entities would subsequently provide any MPM disclosures and, when MPMs do exist, the narrative reporting that accompanies the financial statements would be likely to meet users’ information needs.

Question 1(b): Disaggregation of specified expenses classified by nature

Do you agree that qualifying entities should be exempt from the requirements of paragraph 83(b) of IFRS 18, which in some circumstances requires an entity to disclose a disaggregation of specified expenses classified by nature? Why or why not?

Table 3: Summary of responses to question 1(b)

Category of response Number
Agreed 9
Agreed with reservations 1
Disagreed -
Total 10

13All respondents agreed with the proposal that qualifying entities should be exempt from the requirements of paragraph 83(b) of IFRS 18. However, one respondent had reservations about specific aspects of the proposal.

FRC response

14The FRC has proceeded with the proposal, but made minor changes to proposed paragraph AG1(kA) to be clear that the disclosures required by paragraph 83 of IFRS 18 are also applied by a qualifying entity that presents its profit and loss account using a Companies Act format with expenses classified by function, unless it takes the exemption from paragraph 83(b) of IFRS 18 that is available in paragraph 8(g) of FRS 101.

Question 1(c): Extant exemptions that apply to requirements in IAS 1

Amendments are proposed to maintain extant exemptions that apply to requirements in IAS 1 that have been retained in IFRS 18 or moved to other IFRS Accounting Standards by IFRS 18, but, other than as set out above in Questions 1(a) and 1(b), no other exemptions to IFRS 18 requirements are proposed. Do you agree with this approach? Why or why not?

Table 4: Summary of responses to question 1(c)

Category of response Number
Agreed 7
Agreed with reservations 3
Disagreed -
Total 10

15All respondents agreed in general with the proposal to maintain extant exemptions that apply to requirements in IAS 1 that have been retained in IFRS 18 or moved to other IFRS Accounting Standards by IFRS 18. However, some respondents had reservations about specific aspects of the proposals.

FRC response

16The FRC has proceeded with the proposal, except for the proposed amendment to paragraph 8(d) of FRS 101.

17The proposed amendment to paragraph 8(d) of FRS 101 would have required a qualifying entity to disclose the information required by paragraphs 19A and 19B of IFRS 7 Financial Instruments: Disclosures about financial instruments classified as equity that entitle the holder to a pro rata share of the entity’s net assets in the event of the entity’s liquidation. These requirements were moved by IFRS 18 from paragraphs 80A and 136A of IAS 1. However, reflecting on respondents’ comments, the FRC has concluded that those requirements should not be treated differently to other requirements of IFRS 7. Therefore, the FRC has not amended paragraph 8(d) of FRS 101, and an exemption will be available from paragraphs 19A and 19B of IFRS 7 on the same basis as the other requirements of IFRS 7.

Question 2: IFRS 19 Subsidiaries without Public Accountability: Disclosures

Do you agree that an entity that applies FRS 101 should not apply IFRS 19? Why or why not?

Table 5: Summary of responses to question 2

Category of response Number
Agreed 9
Agreed with reservations -
Disagreed 1
Total 10

18Most respondents agreed with the proposal that an entity that applies FRS 101 should not apply IFRS 19. However, one respondent thought that the FRC should wait for further clarity over the mechanism through which UK companies will be able to apply IFRS 19. Some respondents commented generally on the adoption of IFRS 19 for use in the UK.

FRC response

19The FRC has proceeded with the proposals. FRS 101 needs to be ready should IFRS 19 be endorsed for use in the UK or Ireland because IFRS 19 has early adoption provisions, and FRS 101 would not operate correctly in some circumstances if an entity applied IFRS 19 at the same time.

Question 3: Other comments

Do you have any other comments on the proposed amendments to FRS 101?

Table 6: Summary of responses to question 3

Category of response Number
Further comments provided 4
No further comments provided 6
Total 10

20Some respondents commented further on the proposed amendments.

FRC response

21In response to respondents’ feedback, the FRC has refined aspects of the proposals, including:

  1. adding paragraph 8B to permit a qualifying entity not to provide comparative information in respect of paragraph 51 of Schedule 1 to the Regulations, consistent with paragraph 3.14A of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland;
  2. removing proposed paragraph AG1(rA), on the basis that entities applying FRS 101 are very unlikely to need to consider the equivalence of subtotals presented in primary financial statements following the Companies Act formats to subtotals presented in primary financial statements following the IFRS 18 format; and
  3. amending paragraph AG1(j) to explain more plainly to which specific types of entity the requirements apply.

Question 4: Consultation stage impact assessment

Do you agree with the conclusion in the consultation stage impact assessment? Why or why not?

Table 7: Summary of responses to question 4

Category of response Number
Agreed 5
No specific comments provided 5
Total 10

22All respondents that commented on the consultation stage impact assessment agreed with the conclusion. Some respondents commented on specific aspects of the consultation stage impact assessment.

FRC response

23The FRC has proceeded with the proposals. However, the previous statement that there are likely to be few entities applying FRS 101 that present primary financial statements following the Companies Act formats has been deleted. After carrying out preliminary analysis using a test version of the FRC’s CODEx Toolkit2, the FRC now believes the proportion to be higher. This change reduces the expected cost of applying these amendments to FRS 101 because entities that present primary financial statements following the Companies Act formats will be less affected than those that apply an IFRS-based format.

3. Impact Assessment

Introduction

24The FRC is committed to a proportionate approach to the use of its powers, making effective use of impact assessments and having regard to the impact of regulation on small enterprises.

25Because FRS 101 is an optional standard that is intended to enable cost-effective financial reporting within groups, it is only expected to be applied by those qualifying entities that consider it a cost-effective option.

26FRS 101 requires an entity to apply IFRS Accounting Standards that have been adopted in the relevant jurisdiction, subject to specified disclosure exemptions. This approach helps to enable cost-effective financial reporting within groups because those entities would be likely to have to prepare information in accordance with those standards for the consolidated group accounts and therefore alignment may minimise costs compared to needing a separate preparation of information for individual accounts.

27Without intervention to amend FRS 101, an entity applying FRS 101 would need to provide all the disclosures required by any new IFRS Accounting Standard, or amendment to an IFRS Accounting Standard, adopted in the relevant jurisdiction.

Amendments to FRS 101

28The FRC has reviewed all new standards and amendments issued by the IASB3 up to 31 August 2024:

  1. IFRS 18 Presentation and Disclosure in Financial Statements;
  2. IFRS 19 Subsidiaries without Public Accountability: Disclosures;
  3. Amendments to the Classification and Measurement of Financial Instruments—Amendments to IFRS 9 and IFRS 7; and
  4. Annual Improvements to IFRS Accounting Standards—Volume 11.

29As a result of that review, amendments are made to FRS 101 that:

  1. maintain extant exemptions from disclosure requirements in IAS 1 Presentation of Financial Statements that have been transferred to the new standard IFRS 18 or other IFRS Accounting Standards;
  2. exempt all qualifying entities from considering whether they have, and disclosing information about, MPMs;
  3. exempt a qualifying entity from providing detailed quantitative analysis about the nature of expenses classified by function in the statement of profit and loss; and
  4. prevent a qualifying entity which applies FRS 101 from applying IFRS 19.

30The extant exemption (except for financial institutions) from the requirements of IFRS 7 Financial Instruments: Disclosures, provided that equivalent disclosures are included in the consolidated financial statements of the group in which the entity is consolidated, will apply automatically to both:

  1. the disclosure requirements moved from IAS 1 about financial instruments classified as equity that entitle the holder to a pro rata share of the entity’s net assets in the event of the entity’s liquidation; and
  2. the new disclosure requirements introduced by Amendments to the Classification and Measurement of Financial Instruments—Amendments to IFRS 9 and IFRS 7 about investments in equity instruments designated at fair value through other comprehensive income and about financial instruments with contingent features.

Impact of amendments

31The application of IFRS 18, if it is adopted, will affect all preparers that apply FRS 101 for accounting periods beginning on or after 1 January 2027 because FRS 101 is based on applying adopted IFRS. However, the FRC expects that entities will find that the core concepts and many disclosure requirements currently in IAS 1 are transferred to IFRS 18 without substantive modification, and entities that will continue to present primary financial statements following the Companies Act formats will be less affected than those choosing to apply adapted formats. The FRC’s amendments will mean that FRS 101 will continue to require a similar level of disclosure both before and after the introduction of IFRS 18. Therefore, qualifying entities will largely avoid the costs they would otherwise have incurred in applying the new disclosure requirements of IFRS 18. For example:

  1. existing exemptions for requirements that have been moved from IAS 1 to IFRS 18 or other IFRS Accounting Standards have been maintained; and
  2. exempting qualifying entities from the requirements for MPMs will save all qualifying entities from having to consider whether they have MPMs. The FRC expects that most qualifying entities will not have MPMs and therefore the costs of making that assessment would usually be unnecessary. Those qualifying entities that do have MPMs will be saved the cost of making disclosures about them and potentially having those disclosures audited.

32It is necessary to prevent a qualifying entity from applying IFRS 19, because FRS 101 and IFRS 19 cannot logically be applied at the same time. FRS 101 is designed to be applied to the disclosure requirements of full IFRS Accounting Standards, not to the reduced disclosure requirements set out in IFRS 19. The FRC expects that the unambiguous statement to that effect in FRS 101 will save qualifying entities the cost of considering this issue.

33The FRC expects that the disclosure requirements moved to IFRS 7 about financial instruments classified as equity that entitle the holder to a pro rata share of the entity’s net assets in the event of the entity’s liquidation and the new disclosure requirements added to IFRS 7 about investments in equity instruments designated at fair value through other comprehensive income and about financial instruments with contingent features will be applicable only to a small subset of preparers. In addition, many affected qualifying entities could avoid the costs they would otherwise have incurred by applying the existing conditional exemption in FRS 101 from all of the requirements of IFRS 7.

34In developing financial reporting standards, the overriding objective of the FRC is 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 FRC continues to believe that qualifying entities usually have few users of their financial statements, and particularly few users that would be external to the group that the qualifying entity is part of. Any external users are likely to be providers of credit to the qualifying entity whose interest is generally likely to be focused on information about the liquidity and solvency of the qualifying entity.

35In relation to the issues set out above, the FRC provides exemptions from requirements of adopted IFRS because it expects that the benefits to users of financial statements of qualifying entities would not outweigh the associated costs of those qualifying entities providing that information. Correspondingly, when exemptions are not provided, the FRC expects that the new disclosures should not be onerous for FRS 101 preparers to provide, should provide relevant information to the users of the financial statements, and the benefit to users would exceed the cost to preparers.

Conclusion

36Overall, the FRC believes that FRS 101 will continue to have a positive impact on the cost-effectiveness of the preparation of financial statements.

Appendix A: List of respondents to consultation

  1. KPMG LLP
  2. ICAS
  3. Grant Thornton UK LLP
  4. ICAEW
  5. Deloitte LLP
  6. PricewaterhouseCoopers LLP
  7. Financial Reporting Technical Committee of Chartered Accountants Ireland
  8. Ernst & Young LLP
  9. Forvis Mazars LLP

One further response was provided in confidence.

Financial Reporting Council

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Footnotes

  1. That is, a qualifying entity whose debt or equity instruments are publicly traded, or that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market. ↩

  2. <https: company-and-organisational-data-explorer="" digital-reporting="" library="" www.frc.org.uk=""></https:> ↩

  3. <https: ?2024="&language=en&year=all#amendments-and-new-standards" issued-standards="" list-of-standards="" www.ifrs.org=""></https:> ↩

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Name Feedback Statement and Impact Assessment – Amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle
Publication date 15 May 2025
Type Feedback paper
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