UK GAAP Triennial Review Mei Ashelford. UK GAAP Project Director Financial Reporting Council #PF17

Transcription

1 UK GAAP Triennial Review 2017 Mei Ashelford UK GAAP Project Director Financial Reporting Council

2 Background FRS 102 issued Mar 2013, effective from 1 January 2015 First triennial review was delayed by a year to allow more implementation experience to develop Amendments from triennial review will be effective from 1 January 2019

3 Objective High-quality understandable financial reporting proportionate to the size and complexity of the entity and users information needs

4 Principles To provide succinct financial reporting standards that: a. have consistency with international accounting standards unless an alternative clearly better meets the overriding objective; b. balance improvement with stability; c. balance consistent principles with proportionate and practical solutions; d. promote efficiency within groups; and e. are cost-effective to apply.

5 Approach

6 Sources of amendments Stakeholder feedback Changes to IFRS and 2015 Amendments to the IFRS for SMEs Improvements identified by the FRC including editorial amendments

7 Stakeholder feedback UK GAAP Technical Advisory Group feedback General request for feedback (Mar 2016) Consultation Document Approach to changes to IFRS (Sep 2016) FRED 67 Incremental improvements and clarifications (Mar 2017) FRED 68 Gift aid (Sep 2017)

8 Request for feedback (Mar 2016)

9 Request for feedback Seek informal feedback to engage with wider range of stakeholders Feedback: Overall, positive feedback of FRS 102 Support for revised principles focusing on balancing improvement with stability and proportionate and practical solutions Small number of recurring issues

10 Consultation Document Approach to changes in IFRS (Sep 2016)

11 Proposals Proposed to make changes for: IFRS 10 Consolidated Financial Statements - Control model IFRS 9 Financial Instruments - Expected loss model IFRS 15 Revenue from contracts with customers IFRS 16 Leases Exposure draft Sep 2017 Effective date 1 Jan 2022

12 Feedback Wait for more IFRS implementation experience before developing detailed proposals Project has been deferred Scope and timetable TBC

13 FRED 67 Incremental improvements and clarifications

14 Aims No wholesale changes proposed To make things the requirements easier and / or clearer To make the document easier to read and navigate

15 Proposals Five key amendments proposed Editorial improvements Consequential amendments to other UK standards

16 Key amendments Small entity directors loans Removal of undue cost or effort Investment property rented to another group entity Classification of financial instruments Intangible assets acquired in a business combination Definition of a financial institution

17 Directors loans Frequently raised issue for small entities Practical issues around determining appropriate discount rate Cost vs benefit

18 Directors loans Solution: Exemption for small entities only Loans from person in director s group of close family members (must include a shareholder) Initial measurement at transaction price

19 Directors loans interim relief Amendment to FRS 102 issued May 2017 Defers requirement for initial measurement at present value until FRED 67 finalised Small entities only Effective immediately

20 Group investment properties Removal of all undue cost or effort exemptions Introduction of accounting policy choice to measure group IP at either cost or fair value No policy choice for non-group IP must be measured at fair value

21 Classification of financial instruments New and challenging area for implementation Rules-based - do not always result a logical classification Solution: Insertion of principle-based description Check detailed conditions first, then apply the description Will result in more instruments being classified as basic

22 Intangible assets acquired in a business combination Current requirement for separation unclear Solution: Separately recognise intangible from goodwill when: arises from contractual or other legal rights; and separable. Option to separate more, but must be applied consistently to the class of intangibles to all combinations

23 Definition of a financial institution Affects level of disclosure required Catch all part of definition difficult to apply in practice Solution: Deletion of stockbroker from definition Catch all amended to be clearer Disclosure strengthened for all entities when the risks arising from financial instruments are particularly significant

24 Other changes Introduction of net debt reconciliation Introduction of disclosure about unconsolidated special purpose entities Exemption from KMP compensation Revenue requirements to stay the same and not to go ahead with proposals

25 Effective date Periods beginning on or after 1 January 2019 Transitional exemptions for: investment property rented to another group entity intangible assets acquired in business combinations

26 FRED 68 Payments by subsidiaries to their charitable parents that qualify for gift aid

27 FRED 68 Only applicable to subsidiaries of charitable parents that make gift aid payments that qualify for tax relief Aim to reduce diversity in practice Proposal: To allow tax effect to be recognised early Liability for the gift aid payment not to be recognised early unless legal obligation exists

28 Effective date Periods beginning on or after 1 January 2019 Early application permitted without the need to early adopt all other amendments to FRS 102

29 Finalisation of amendments

30 Finalisation of amendments Expect to finalise amendments by end of December 2017 Revised editions of all UK standards expected to be issued January / February 2018 SORPs to be updated during 2018

31 Questions?

32 The information contained in this slide presentation is for general guidance only. You should neither act, nor refrain from action, on the basis of any such information, but be guided by the applicable law, regulations, standards and guidance. The FRC shall not be liable for any losses howsoever arising from any action or decision taken or not taken as a result of any person relying on or otherwise using this slide presentation or arising from any omission from it. You agree to indemnify, defend and hold harmless the FRC, its employees and representatives in connection with any claims brought or losses costs or expenses caused to the FRC howsoever arising in connection with your use of this presentation.