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FRS 102 the Financial Reporting Standard Applicable in the UK and Republic of Ireland

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FRS 102 the Financial Reporting Standard Applicable in the UK and Republic of Ireland FRS 102 Cover.qxd 3/19/2018 12:51 PM Page 1 Standard Accounting and Reporting Financial Reporting Council March 2018 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland Further copies, £????? (post-free) can be obtained from: FRC Publications Lexis House 30 Farringdon Street London EC4A 4HH Tel: 0330 161 1234 Email: [email protected] Or order online at: www.frcpublications.com FRS 102 Cover.qxd 3/19/2018 12:51 PM Page 2 The FRC's mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality. 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 any omission from it. © The Financial Reporting Council Limited 2018 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 8th Floor, 125 London Wall, London, EC2Y 5AS. This Financial Reporting Standard contains material in which the IFRS Foundation holds copyright and which has been reproduced with its permission. The copyright notice is reproduced on page 398. Financial Reporting Council March 2018 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland is an accounting standard. It is issued by the Financial Reporting Council, as a prescribed body, in respect of its application in the United Kingdom and the Republic of Ireland. Contents Page Overview 5 FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland 7 1 Scope 8 1A Small Entities 13 Appendix A: Guidance on adapting the balance sheet formats 16 Appendix B: Guidance on adapting the profit and loss account formats 18 Appendix C: Disclosure requirements for small entities in the UK 20 Appendix D: Disclosure requirements for small entities in the Republic of Ireland 29 Appendix E: Additional disclosures encouraged for small entities 44 2 Concepts and Pervasive Principles 45 Appendix: Fair value measurement 54 3 Financial Statement Presentation 56 4 Statement of Financial Position 61 5 Statement of Comprehensive Income and Income Statement 65 Appendix: Example showing presentation of discontinued operations 69 6 Statement of Changes in Equity and Statement of Income and Retained Earnings 70 7 Statement of Cash Flows 72 8 Notes to the Financial Statements 78 9 Consolidated and Separate Financial Statements 80 10 Accounting Policies, Estimates and Errors 91 11 Basic Financial Instruments 96 12 Other Financial Instruments Issues 115 Appendix: Examples of hedge accounting 124 13 Inventories 135 14 Investments in Associates 139 15 Investments in Joint Ventures 143 16 Investment Property 147 17 Property, Plant and Equipment 150 18 Intangible Assets other than Goodwill 156 19 Business Combinations and Goodwill 164 20 Leases 171 21 Provisions and Contingencies 178 Appendix: Examples of recognising and measuring provisions 183 Financial Reporting Council 1 22 Liabilities and Equity 187 Appendix: Example of the issuer’s accounting for convertible debt 192 23 Revenue 195 Appendix: Examples of revenue recognition 202 24 Government Grants 208 25 Borrowing Costs 210 26 Share-based Payment 212 27 Impairment of Assets 218 28 Employee Benefits 226 29 Income Tax 237 30 Foreign Currency Translation 242 31 Hyperinflation 247 32 Events after the End of the Reporting Period 250 33 Related Party Disclosures 253 34 Specialised Activities 257 Agriculture 257 Extractive Activities 260 Service Concession Arrangements 260 Financial Institutions 263 Retirement Benefit Plans: Financial Statements 266 Heritage Assets 269 Funding Commitments 271 Incoming Resources from Non-exchange Transactions 272 Public Benefit Entity Combinations 273 Public Benefit Entity Concessionary Loans 274 Appendix A: Guidance on funding commitments 276 Appendix B: Guidance on incoming resources from non-exchange transactions 277 35 Transition to this FRS 279 Appendices I Glossary 288 II Table of equivalence for company law terminology 315 III Note on legal requirements 316 IV Republic of Ireland legal references 329 2 FRS 102 (March 2018) Approval by the FRC 345 Basis for Conclusions FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland 346 Financial Reporting Council 3 4 FRS 102 (March 2018) Overview (i) The 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. (ii) This FRS is a single financial reporting standard that applies to the financial statements of entities that are not applying EU-adopted IFRS, FRS 101 Reduced Disclosure Framework or FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime1. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (iii) This FRS aims to provide entities with succinct financial reporting requirements. The requirements in this FRS are based on the International Accounting Standards Board’s (IASB) International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) first issued in 2009. The IFRS for SMEs is intended to apply to the general purpose financial statements of, and other financial reporting by, entities that in many countries are referred to by a variety of terms including ‘small and medium-sized’, ‘private’ and ‘non-publicly accountable’. (iv) The FRC has modified the IFRS for SMEs substantially, both in terms of the scope of entities eligible to apply it and in terms of the accounting treatments provided. To reflect this wider scope the proposed name of the standard was revised to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. (v) FRS 102 is designed to apply to the general purpose financial statements and financial reporting of entities including those that are not constituted as companies and those that are not profit-oriented. General purpose financial statements are intended to focus on the common information needs of a wide range of users: shareholders, lenders, other creditors, employees and members of the public, for example. Organisation of FRS 102 (vi) FRS 102 is organised by topic with each topic presented in a separate numbered section. (vii) Terms defined in the Glossary are in bold type the first time they appear in each section, and sub-section within Section 34. (viii) This edition of FRS 102 issued in March 2018 updates the edition of FRS 102 issued in September 2015 for the following: (a) Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Fair value hierarchy disclosures issued in March 2016; (b) Amendments to FRS 101 Reduced Disclosure Framework and FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Notification of shareholders issued in December 2016; (c) Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Directors’ loans – optional interim relief for small entities issued in May 2017; 1 This FRS does not, however, apply to the preparation of ‘Companies Act financial statements’ of certain entities under company law in the Republic of Ireland. Please refer to Appendix IV for further details. Financial Reporting Council 5 (d) Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Triennial review 2017 – Incremental improvements and clarifications issued in December 2017; and (e) some minor typographical or presentational corrections. 6 FRS 102 (March 2018) FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland Financial Reporting Council 7 Section 1 Scope Scope of this Financial Reporting Standard 1.1 This FRS applies to financial statements that are intended to give a true and fair view of a reporting entity’s financial position and profit or loss (or income and expenditure) for a period. 1.2 The requirements of this FRS are applicable to public benefit entities and other entities, not just to companies. However, those paragraph numbers prefixed with ‘PBE’ shall only be applied by public benefit entities, and shall not be applied directly, or by analogy, by entities that are not public benefit entities, other than, when specifically directed, entities within a public benefit entity group. A public benefit entity shall apply all paragraphs prefixed with ‘PBE’ to the extent that they are relevant and, for those public benefit entities within the scope of a Statement of Recommended Practice (SORP), their use is permitted by the applicable SORP. 1.2A An entity applying this FRS must ensure it complies with any relevant legal requirements applicable to it. This FRS does not necessarily contain all legal disclosure requirements. In relation to small companies (see Section 1A Small Entities) most legal
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