The Future of UK GAAP - An update
The three new accounting standards – which will replace most or all of the existing standards (FRS, SSAPs and UITFs) – are the next step in the process of converging UK GAAP with IFRS. They do represent a change to UK GAAP, but entities will have some choices in the process.
When to implement?
It is currently anticipated that the new standards will have a date of mandatory application for accounting periods beginning on or after 1 January 2015. However, early application will be permitted, and is indeed encouraged by ACCA. Note that early application cannot take place until the standards are published. It is expected that FRS 100 and FRS 101 will be published in November 2012, and FRS 102 in January 2013.
Small company choices
If an entity is currently applying the FRSSE, it can choose to continue to apply it. Although all the other UK FRSs are to be replaced by the new framework, the FRSSE will remain. Alternatively a small entity currently applying the FRSSE may choose to apply the new FRS 102 (once it is published). This is an adaptation of IFRS for SMEs. It is probably not a likely course of action, but a small entity will also have the choice of applying full IFRS. A small entity that is not currently applying the FRSSE will have the choice of applying FRS 102 or full IFRS from 1 January 2015, so the directors may want to consider starting to apply the FRSSE now, to give themselves the option of applying it in future.
Medium-sized and large entities
Medium-sized and large entities, as defined by the Companies Act 2006, will have no choice but to make a change. They can, however, choose to adopt FRS 102, or alternatively full IFRS.
Sudsidiaries and parent companies
The new FRS 101 (FRED 47) will allow financial statements to be prepared for subsidiaries and parent companies using recognition and measurement as set out in EU-adopted IFRS, but with reduced disclosures.
Proposals for a separate Financial Reporting Standard for Public Benefit Entities (FRSPBE) have been dropped. Instead FRS 102 incorporates public benefit entity text with the relevant paragraphs prefixed 'PBE'. These will apply to all types and size of PBE. The treatment of certain activities, such as the holding of heritage assets, will in future be addressed in the general text of FRS 102. These provisions will apply to all entities, not just PBEs.