FRS 102 - Triennial Review 2017
Effective for periods starting from
01.01.2019. Early adoption permissible, if adopted, all amendments should
be applied. Cannot pick and choose only relevant sections. There is an exception,
amendments on Directors Loans, can be adopted without adopting all other
amendments.
There are quite a few Amendments to FRS 102,
but I have given snapshot of 7 Main amendments which would be used by most small
and mid-sized practising firms. Also given is a list of Other notable amendments,
accountants who are interested in having further information on them can read
the link provided under the same.
Directors’ Loan Exemption
Section 11 has introduced new
exemption to measure loans at transaction price instead of Fair Value. Loans
which qualify for such exemptions are:
1. Loan
from Directors
2. Loan
from group of close family members of Directors, which consist at least one
shareholder
Investment property &
Investments in Associate & Joint Ventures
Undue Cost or effort exemption
removed.
1. All
investment properties now must be valued on the date of the Financial
Statements. Except for properties rented to another group entity, which have
been given a choice of Accounting policy
2. Investment
properties rented to other group entities have option of following any 1 policy
mentioned below:
a.
They can be measured at Cost less depreciation
and impairment. On transition to this new accounting policy, entity is
permitted to use the Fair Value of such property on date of transition as its
deemed cost going forward.
b.
They should be valued and stated at Fair Value
on the date of the statement of financial position (Balance Sheet).
Valuation need not be undertaken
by an independent valuer, however the fair value should be assessed based on
the guidance set out in the appendix to Section 2 (Concepts and Pervasive Principles).
3. For
Investments in Associates and Joint Ventures, entities have the option to
choose between fair value and cost. Entities which continue to use the fair
value basis, cannot use the undue cost/effort exemption, now have to value such
investments on the date of the statement of financial position (Balance Sheet).
Investments in Group entity
– Which are NOT subsidiaries, associates or joint ventures
Accounting policy choice:
1. Cost
less impairment
2. At
fair value with changes through P&L
3. At
fair value with changes through Other Comprehensive Income.
Consolidated & Separate Financial
Statements
Parents which prepare separate
financial statements have got a choice of Investment categories and also
additional disclosure.
1. Option
to break-up investments into 2 categories
a.
Investment in Companies which can be consolidated
b.
Investment in Companies which are part of
Investment portfolio and not consolidated.
2. New
requirement of disclosure – Need to disclose entities which are not used in consolidation.
Have to elaborate on their nature and extent of interest along with risks
associated thereon.
Definition of Basic Financial
Instrument widened
In addition to the Debt
instruments which were considered as Basic Financial Instruments as per Section
11, now the below instruments would also be covered in this category with
addition of new paragraph 11.9A.
A Debt instrument would be
classified as Basic Financial Instrument, if it gives rise to cash flown on
specified dates that constitute repayment of the principal advanced, together
with reasonable compensation for the time value of money, credit risk and other
basic lending risks and costs.
Choice of recognising Intangible
Assets in business combination widened
Entities are allowed to
capitalise Intangible Assets Other than Goodwill if:
1. Criteria
to capitalise, should meet All 3 below:
a.
Meet the recognition criteria
b.
Are separable
c.
Arise from contractual or legal obligation
2. Additional
intangible assets can be capitalised if 2 conditions are satisfied. Condition A
is mandatory and Any 1 condition from B & C should be met:
a.
Meet the recognition criteria
b.
Separable
c.
Arise from contractual or legal rights.
Both the classes stated above
should be stated separately under intangible asset category and should be
applied consistently to all business combinations. One can see the criteria in
both classes stated above is similar but the condition to meet the requirement are
different hence should be maintained as separate classes.
New exemption on Related Party
Disclosures
Companies which must mandatorily
disclose Directors remuneration, need not disclose key management personnel
compensation if the Key Management personnel and Directors are same personnel.
Other notable amendments
Section 1A – EU Accounting
Directive implemented for Republic of Ireland
Section 2 – Fair Value guidance
moved to this Section
Section 3 – Any small entity can
take exemption from providing Cash Flow, not restricted to entities adopting
Section 1A unless required by any other law. Comparatives are mandatory for
disclosures required by SORP’s.
Section 5 – Clarification on
items to be included and excluded from operating profit
Section 7 - Additional Net Debt
reconciliation to be disclosed. Identical to the requirements of FRS1 Cash Flow
Statements
Section 11 – Various amendments.
Section 19 – Definition of Group
reconstruction expanded
Section 22 – New guidance on Debt
for Equity Swaps
Section 23 – Additional guidance
on Revenue for Agents and Principals based on IAS 18
Section 26 – Minor improvements
to align some definitions to IFRS2
Section 29 – Exemption introduced
in relation to tax effect of gift aid payments
Section 34 – Definition of
Financial Institution revised.
Below link is ready reference for
those who are interested in reading further on above notable amendments.
