FRS 102 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 for a period. It applies not only to companies but also to public benefit and other types of entity.
Reduced disclosures area available for the individual accounts of qualifying subsidiaries and parents. Section 1A Small Entities sets out the different presentation and disclosure requirements available to small entities.
FRS 102 is based on the IFRS for SMEs, however the text of the IASB’s standard has been amended in some significant respects in order to:
- comply with the Companies Act;
- allow additional accounting policy choices such that where a policy choice exists in current UK GAAP and this is aligned with IFRS the choice also exists in FRS 102; and
- reflect feedback during the consultation process.
In some circumstances, entities applying FRS 102 will need to refer to other accounting standards.
- Entities with publicly traded ordinary shares must apply IAS 33 Earnings per Share.
- Entities with publicly traded equity or debt instruments must apply IFRS 8 Operating Segments.
- Entities engaged in extractive industries must apply IFRS 6 Exploration for and Evaluation of Mineral Resources.
- Entities that issue insurance contracts, reinsurance contracts or financial instruments must apply FRS 103 Insurance Contracts.
FRS 102 includes some disclosure exemptions for subsidiary and parent companies meeting certain conditions in their individual accounts. The main exemptions are from:
- preparation of a cash flow statement;
- disclosure of related party transactions with and between wholly-owned subsidiaries;
- disclosures relating to financial instruments.
Section 1A Small Entities may be applied by:
- a company meeting the definition of a small company that is not excluded from the small companies regime;
- an LLP meeting the definition of small that is not excluded from the small LLPs regime*; or
- any other entity that would have met the definition of a small company if it were an incorporated company*.
*To the extent that the requirements of Section 1A do not conflict with any statutory framework under which such entities report, for example, from a SORP making body.
Who should apply the standard?
FRS 102 will be applied by all entities which are neither required nor elect to apply:
- Adopted IFRS (being EU-adopted IFRS prior to 1 January 2021 and thereafter UK-adopted international accounting standards for companies that apply UK company law and EU-adopted IFRS for companies that apply Irish company law);
- FRS 101 Reduced Disclosure Framework; or
- FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime.