FRC issues amendments to FRS 101 and FRS 102

News types: Codes and Standards Announcements

Published: 23 July 2014

PN 44/14

The Financial Reporting Council (FRC) has today issued amendments to new UK GAAP to improve the accounting for certain financial transactions, which will also improve ease of use of the standards and reduce the cost of compliance.

The amendments to FRS 102:

relate to financial instruments:

- updating the requirements on hedge accounting, making hedge accounting more readily available to entities where it is consistent with their risk management processes;
- relaxing the conditions for regarding financial instruments as ‘basic’, with the effect that more financial instruments will be measured by reference to cost rather than fair value;

make transition to FRS 102 less costly; and

are effective from the same date as FRS 102, 1 January 2015.

Roger Marshall, FRC Board Member and Chairman of the Accounting Council, said:

“The FRC has amended FRS 102 prior to its effective date to improve its hedge accounting requirements, in line with international developments.  The changes will better reflect entities’ risk management strategies, and respond to entities’ concerns that FRS 102 required too many financial instruments to be measured at fair value where a cost-based measurement would be appropriate.  We have listened carefully to concerns about making changes close to the effective date of FRS 102, but we believe overall these amendments will both improve financial reporting by UK and Irish entities and reduce the costs of compliance. We have in particular provided flexible transitional arrangements, as requested by respondents."


FRS 101 allows entities to apply IFRS with exemptions from some disclosures.  The amendments to FRS 101 are the result of its first annual review to ensure those disclosure exemptions are updated on a timely basis as IFRS develops.

Notes to editors

These amendments were consulted on in FRED 51 Draft Amendments to FRS 102 – Hedge accounting, FRED 53 Draft Amendments to FRS 101 (2013/14) and FRED 54 Draft Amendments to FRS 102 – Basic financial instruments.

An Impact Assessment and Feedback Statement for each set of amendments are also published today.

The fully updated versions of FRS 101 Reduced Disclosure Framework and FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland including these amendments will be available within the next month.

Hedge accounting is an option available within FRS 102, which allows entities to reflect the economic substance of their hedging relationships in the financial statements, reducing volatility in reported profit or loss.

FRS 102 requires financial instruments to be classified as ‘basic’ or ‘other’, depending on their terms and conditions.  Generally basic financial instruments are measured by reference to cost and other financial instruments are measured by reference to their fair value.

The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.

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