News October 2012 FRC issues Exposure Draft of limited scope amendments to FRED 48 (draft FRS 102) The Financial Repor

FRC issues Exposure Draft of limited scope amendments to FRED 48 (draft FRS 102) The Financial Reporting Standard applicable in the UK and Republic of Ireland

03 October 2012

PN 013

The FRC has today issued an Exposure Draft of limited scope amendments to the proposed accounting standard draft FRS 102.  The FRC anticipates finalising the draft FRS in early 2013 and for it to be effective for accounting periods beginning on or after 1 January 2015.  The FRC also hopes to finalise its draft FRSs 100 and 101 later this year, enabling subsidiaries and parent entities to take advantage of the reduced disclosure framework for 31 December 2012 year ends should they choose to do so.
The limited scope proposed amendments relate to the accounting for multi-employer pensions and service concession arrangements, and are only likely to affect a small proportion of entities applying UK accounting standards.
The amendment for multi-employer pensions relates to accounting in specific circumstances where there is an agreement to fund a deficit in a multi-employer pension plan.  This is proposed following evidence of diversity in practice in the application of FRS 17 Retirement benefits.  In making this proposed amendment the FRC also notes the current requirements of paragraph FRS 17.9(b)(v), which requires disclosure of any implications for an employer of a deficit in a multi-employer scheme.  Entities participating in multi-employer defined benefit schemes will need to give careful consideration to compliance with this requirement where they have agreed a schedule of funding for a deficit. 
The second amendment relates to accounting, by grantors, for service concession arrangements.  This amendment is proposed in response to feedback from respondents and sets out proposed accounting requirements for grantors. 
In view of the limited scope of these amendments the FRC is inviting comments over a 60 day period, ending on 3 December 2012.
Chairman of the Accounting Council, Roger Marshall, said,

“These proposed amendments will reduce diversity in accounting practice when entities have entered into agreements to fund deficits in defined benefit multi-employer pension plans.  In addition, grantors of service concession arrangements will now have clear principles underpinning their accounting for such arrangements.
We believe this represents the final consultation in completing our review of financial reporting standards and hope to issue the first standards later this year. ”

Notes to editors:

  1. 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.
  2. The Accounting Council was established by the FRC as the relevant Council to assist it in the setting of accounting standards.  It comprises of up to twelve members, at least half of which are practising members of the relevant profession and the remainder will be other stakeholders.  
  3. In January 2012 the Accounting Standards Board (a former operating board of the FRC) issued FRED 48 (draft FRS 102) The Financial Reporting Standard applicable in the UK and Republic of Ireland.  It was part of a package of standards developed and consulted on over a number of years, with the aim of replacing existing UK accounting standards with new standards based on an international framework.  Whilst considering respondents comments to draft FRS 102, and other financial reporting developments, the Accounting Council of the FRC recommended to the FRC that a limited scope Exposure Draft be issued, amending two areas of draft FRS 102.  
  4. Service concession arrangements involve the provision of services to the public, through the operation of infrastructure assets, by one party, on behalf of another.