Financial Reporting - The Shape Of Things To Come
Three new proposed accounting standards from the Accounting Standards Board (ASB) are set to change the face of UK financial reporting.
The ASB has for many years said that UK GAAP was not sustainable in the long term. In October 2010 the ASB issued two exposure drafts – one outlining the reporting frameworks that might apply across all UK entities, and the other setting out the proposed standard to be used by the majority of UK preparers.
The ASB received a significant volume of responses with the majority suggesting, among other things, that the proposals to extend full IFRS to entities falling within a new definition of publicly accountable were unnecessarily onerous and that the proposed new UK standard (tentatively named the Financial Reporting Standard for Medium-sized Entities (FRSME)) was too restrictive.
Since the comment period on the original exposure drafts closed, the ASB has put considerable time into refining and reshaping their original suggestions. At the end of January they issued three new exposure drafts containing their revised proposals.
FRED 46 'Application of Financial Reporting Requirements' (draft FRS 100) FRED 47 'Reduced Disclosure Framework' (draft FRS 101) FRED 48 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (draft FRS 102) Here we look at the proposed shape of future financial reporting as set out in FRED 46. The other two FREDs are considered elsewhere in this newsletter in "UK GAAP – Take 2" and "Reducing the disclosure burden".
The ASB has dropped its suggestion of extending the requirement to apply full EU-adopted IFRS to a wider group than that currently required to do so. Those entities that are eligible to apply the Financial Reporting Standard for Smaller Entities (FRSSE) will be able to continue to use that standard, which will remain virtually unchanged for the time being. All other entities will apply the new 'Financial Reporting Standard applicable in the UK and Republic of Ireland' (referred to hereafter as the 'proposed Financial Reporting Standard').
There are a number of financial institutions that would have met the previously proposed definition of public accountability, but which will now be eligible to use the proposed Financial Reporting Standard. In recognition of the importance of financial instruments to such entities, they will be required...
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