September 2015 FRS 102 The Financial Reporting Standard ...

1 Financial Reporting CouncilSeptember 2015 FRS 102 The Financial Reporting Standardapplicable in the UK and Republic of IrelandAccounting and ReportingStandardFurther copies, (post-free) can be obtained from:FRC PublicationsLexis House30 Farringdon StreetLondonEC4A 4 HHTel: 0845 370 1234 Email: order online at: 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland ( September 2015)FRS 102 29/09/2015 12:40 Page 1 The FRC is responsible for promoting high quality corporategovernance and Reporting to foster investment. We set theUK Corporate Governance and Stewardship Codes as wellas UK standards for accounting, auditing and actuarial represent UK interests in international also monitor and take action to promote the quality of corporate Reporting and auditing.

2 We operate independentdisciplinary arrangements for accountants and actuaries,and oversee the regulatory activities of the accountancy and actuarial professional FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it. The Financial Reporting Council Limited 2015 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office:8th Floor, 125 London Wall, London EC2Y 5 ASThis Financial Reporting Standard contains material in which the IFRS Foundation holds copyright and which has been reproduced with its permission.

3 The copyright notice is reproduced on page 102 09/09/2015 10:19 Page 2 September 2015 FRS 102 The Financial Reporting Standardapplicable in the UK and Republicof IrelandFinancial Reporting CouncilFRS 102 The Financial Reporting Standard applicable in the UK and Republic of Irelandisan accounting Standard . It is issued by the Financial Reporting Council in respect of itsapplication in the United Kingdom and promulgated by the Institute of CharteredAccountants in Ireland in respect of its application in the Republic of Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland1 Scope81A Small Entities12 Appendix A: Guidance on adapting the balance sheet formatsAppendix B: Guidance on adapting the profit and loss account formatsAppendix C: Disclosure requirements for small entitiesAppendix D.

4 Additional disclosures encouraged for small entities2 Concepts and Pervasive Principles283 Financial Statement Presentation374 Statement of Financial Position425 Statement of Comprehensive Income and Income Statement46 Appendix: Example showing presentation of discontinued operations6 Statement of Changes in Equity and Statement of Income and Retained Earnings 527 Statement of Cash Flows548 Notes to the Financial Statements599 Consolidated and Separate Financial Statements6110 Accounting Policies, Estimates and Errors7211 Basic Financial Instruments7712 Other Financial Instruments Issues94 Appendix: Examples of hedge accounting13 Inventories11414 Investments in Associates11815 Investments in Joint Ventures12216 Investment Property12617 Property, Plant and Equipment12918 Intangible Assets other than Goodwill13519 Business Combinations and Goodwill14320 Leases15021 Provisions and Contingencies157 Appendix: Examples of recognising and measuring provisions22 Liabilities and Equity166 Appendix: Example of the issuer s accounting for convertible debtFinancial Reporting Council 123 Revenue174 Appendix.

5 Examples of revenue recognition24 Government Grants18725 Borrowing Costs18926 Share-based Payment19127 Impairment of Assets19728 Employee Benefits20529 Income Tax21630 Foreign Currency Translation22131 Hyperinflation22632 Events after the End of the Reporting Period22933 Related Party Disclosures23234 Specialised ActivitiesAgriculture236 Extractive Activities239 Service Concession Arrangements239 Financial Institutions241 Retirement Benefit Plans: Financial Statements244 Heritage Assets247 Funding Commitments248 Incoming Resources from Non-exchange Transactions249 Public Benefit Entity Combinations251 Public Benefit Entity Concessionary Loans252 Appendix A: Guidance on funding commitmentsAppendix B: Guidance on incoming resources from non-exchange transactions35 Transition to this FRS257 Approval by the FRC266 The Accounting Council s Advice to the FRC to issue FRS 102267 The Accounting Council s Advice to the FRC to issue Amendments toFRS 102 Basic Financial instruments and Hedge accounting303 The Accounting Council s Advice to the FRC to issue Amendments toFRS 102 Pension obligations309 The Accounting Council s Advice to the FRC to issue Amendments toFRS 102 Small entities and other minor amendments3132 FRS 102 ( September 2015)

6 AppendicesI Glossary322II Significant differences between FRS 102 and the IFRS for SMEs348 III Table of equivalence for UK Companies Act terminology357IV Note on legal requirements358V Previous consultations371VI Republic of Ireland (RoI) legal references376 Financial Reporting Council 34 FRS 102 ( September 2015)Summary(i) With effect from 1 January 2015 the Financial Reporting Council (FRC) revised financialreporting standards in the United Kingdom and Republic of Ireland. The revisionsfundamentally reformed Financial Reporting , replacing the extant standards with fiveFinancial Reporting standards :(a) FRS 100 Application of Financial Reporting Requirements;(b) FRS 101 Reduced Disclosure Framework;(c) FRS 102 The Financial Reporting Standard applicable in the UK and Republic ofIreland;(d) FRS 103 Insurance Contracts; and(e) FRS 104 Interim Financial FRC has also issued FRS 105 The Financial Reporting Standard applicable to theMicro-entities Regimeto support the implementation of the new micro-entities regime.

7 (ii) The FRC s overriding objective in setting accounting standards is to enable users ofaccounts to receive high-quality understandable Financial Reporting proportionate to thesize and complexity of the entity and users information needs.(iii) In meeting this objective, the FRC aims to provide succinct Financial Reporting standardsthat:(a) have consistency with international accounting standards through the application ofan IFRS-based solution unless an alternative clearly better meets the overridingobjective;(b) reflect up-to-date thinking and developments in the way entities operate and thetransactions they undertake;(c) balance consistent principles for accounting by all UK and Republic of Ireland entitieswith practical solutions, based on size, complexity, public interest and users information needs;(d) promote efficiency within groups; and(e) are cost-effective to apply.

8 (iv) The requirements in this Financial Reporting Standard (FRS) take into consideration thefindings from all relevant consultations.(v) This FRS is a single Financial Reporting Standard that applies to the Financial statements ofentities that are not applying EU-adopted IFRS, FRS 101 or FRS Financial Reporting Standard applicable in the UK and Republic of Irelandand the IFRS for SMEs(vi) This FRS aims to provide entities with succinct Financial Reporting requirements. Therequirements in this FRS are based on the International Accounting standards Board s(IASB) International Financial Reporting Standard for Small and Medium-sized Entities(IFRS for SMEs) issued in 2009. The IFRS for SMEs is intended to apply to the generalpurpose Financial statements of, and other Financial Reporting by, entities that in many1 This FRS does not, however apply to the preparation of Companies Act accounts of certain companies under company law inthe Republic of Reporting Council 5countries are referred to by a variety of terms including small and medium-sized , private and non-publicly accountable.

9 (vii) The FRC has modified the IFRS for SMEs substantially, both in terms of the scope ofentities eligible to apply it and in terms of the accounting treatments provided. To reflectthis wider scope the proposed name of the Standard was revised to FRS 102 FinancialReporting Standard applicable in the UK and Republic of Ireland.(viii) FRS 102 is designed to apply to the general purpose Financial statements and financialreporting of entities including those that are not constituted as companies and those thatare not profit-oriented. General purpose Financial statements are intended to focus on thecommon information needs of a wide range of users; shareholders, lenders, othercreditors, employees and members of the public, for of FRS 102(ix) FRS 102 is organised by topic with each topic presented in a separate numbered to paragraphs are identified by section followed by paragraph numbers are in the form of , where xx is the section number and yy is thesequential paragraph number within that section.

10 Those paragraphs that apply solely topublic benefit entities are identified by the prefix PBE 2. In order to maintain consistencywith the paragraph numbering of the IFRS for SMEs, when a paragraph from the IFRS forSMEs has been deleted and not replaced with an alternative paragraph, the phrase [notused] is given. In examples that include monetary amounts, the measuring unit isCurrency Unit (abbreviated as CU).(x) All the paragraphs of FRS 102 have equal authority. Some sections include appendices ofimplementation guidance or examples. Some of these are an integral part of the FRSwhile others provide guidance concerning its application; each specifies its status.(xi) This FRS is set out in Sections 1 to 35 and the Glossary (Appendix I).