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Cutting
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UK GAAP
kpmg.co.uk
http://www.kpmg.co.uk/http://www.kpmg.co.uk/
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CuttingthroughUKGAAP|02
Cutting through UK GAAP
KPMG’sguidetoFinancialReportingStandards100,101and102
Inlate2012andearly2013theFinancialReportingCouncilissuedasuiteofstandardsthatreplace
existingUKaccountingstandards.Theirreleaserepresentstheculminationoftenyears’consultation
onhowbesttobringUKGAAPuptodate.Theprincipalchallengesinthatperiodhavebeentomaintain
consistencywiththerequirementsofUKlawandtoachieveproportionalitywiththeneedsoftheusers
offinancialstatements.
EntitiesthatarecurrentlyrequiredtoapplyEUIFRSbyapplicablelawandregulationwillcontinueto
doso.Otherentitieswillbeable,subjecttoeligibility,tochoosetopreparetheirfinancialstatements
inaccordancewithEUIFRS,FRS101,FRS102ortheFRSSE.ForsubsidiariesofentitiespreparingEUIFRSconsolidatedfinancialstatements,theapplicationofFRS101inparticularwillallowthe
useofaccountingpoliciesthataremoreconsistentwiththoseofthegroup,withouttheperceived
burdenofapplyingthefulldisclosurerequirementsofEUIFRS.Groupscanelectforsomeoftheir
subsidiariestoapplyFRS101andothersFRS102(or,ifeligible,theFRSSE),sincebothwillbe
`CompaniesActaccounts’.
Thosechargedwithgovernancewillneedtomakeimportantdecisionsaboutwhichaccounting
frameworktoapply.Thiswillrequirenotonlyconsiderationoftheavailableaccountingoptions,
butalsoassessmentofthepotentialeffectonaccountingsystems,stafftraining,taxationand
otherarrangementssuchasloancovenants.Theywillalsoneedtoconsiderthepotentialeffecton
distributableprofits.Somemaywishtoadoptthenewstandardsbeforethemandatoryeffective
dateofperiodscommencingonorafter1January2015.Earlyadoptionisindeedpermittedbut
mayrequirecarefulconsiderationoftherelativemeritsofeachoftheavailablestandards.
Inthispublication,wesummarisetherequirementsofeachofthenewstandardsFRSs100,101and
102.Inaddition,wehighlightthekeyaccountingdifferencesbetweenFRS102,previousUKGAAPand
EUIFRS,inordertoinformthosedecidingwhichstandardstoapplyandtoeasethetransitiontoFRS
102forthosethatchoosetoapplythatstandard.
AsFRS102isanewfinancialreportingframework,commonpracticeandinterpretationhasyetto
developinthoseareasinwhichthestandardisnotexplicitinitsrequirements.Wewillupdatefuture
editionsofthispublicationtoreflectthatbodyofexperienceasitdevelops,whichmaybeinfluenced
bothbypastUKGAAPpracticeandevolvingIFRSapplication.AnewGAAP,applicabletotensofthousandsofentitiesallatonce,isanexcitingandchallenging
prospect.ThisnewGAAPhasbeentenyearsingestationandallowsratherlesstimeforentities
tounderstandit.Welookforwardtohelpingyoutodojustthat,beginningwiththispublication.
Tony Cates
Head of Audit, KPMG in the UK
April2013
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
03|CuttingthroughUKGAAP
Interpretativeguidanceisbasedonspecificfactsandcircumstances.Inmanyinstances,furtherinterpretationwillbeneededinorderforanentitytoapplyFRSs100,101and102toitsownfacts,circumstancesandindividualtransactions.
Further,someoftheinformationcontainedinthispublicationisbasedontheinterpretationsofKPMGintheUK’s
DepartmentofProfessionalPractice,thatmaychangeaspracticeandimplementationguidancedevelop.Usersare
cautionedtoreadthispublicationinconjunctionwiththeactualtextofthestandardsandimplementationguidance
issued,andtoconsulttheirprofessionaladvisersbeforeconcludingonaccountingtreatmentsfortheirowntransactions.
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CuttingthroughUKGAAP|04
Contents
About this publication 05
Abbreviations 06
Introduction 07
FRS 100: Application of financial reporting requirements 09
FRS 101: Reduced disclosure framework 17
FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland
03
04
05
06
07
08
09 10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34 34A
34B
34C
34D
34E
34F
34G
34H
34I
34J
34K
35
Scope,concepts,principlesandpresentation 21
Statementoffinancialposition(Balancesheet) 35
Statementofcomprehensiveincomeandincomestatement 39
Statementofchangesinequityandstatementofincomeandretainedearnings 47
Statementofcashflows 51
Notestothefinancialstatements 57
Consolidatedandseparatefinancialstatements 61 Accountingpolicies,estimatesanderrors 75
Basicfinancialinstruments 81
Otherfinancialinstruments 93
Inventories 103
Associates 109
Jointventures 117
Investmentproperty 123
Property,plantandequipment 127
Intangibleassetsotherthangoodwill 135
Businesscombinationsandgoodwill 145
Leases 157
Provisionsandcontingencies 167
Liabilitiesandequity 175
Revenue 183
Governmentgrants 191
Borrowingcosts 195
Sharebasedpayments 199
Impairmentofassets 207
Employeebenefits 217
Incometax 229
Foreigncurrencytranslation 235
Hyperinflation 241
Eventsaftertheendofthereportingperiod 245
Relatedpartydisclosures 249
Specialisedactivities 257 Agriculture 259
Extractiveactivities 261
Serviceconcessionarrangements 263
Financialinstitutions 267
Retirementbenefitplans:Financialstatements 269
Heritageassets 273
Fundingcommitments 275
Publicbenefitentities:Scope 277
Publicbenefitentities:Incomingresourcesfromnonexchangetransactions 279
Publicbenefitentities:Entitycombinations 281
Publicbenefitentities:Concessionaryloans 283
TransitiontoFRS102 285
Appendices
AppendixI:Listofstandardsandinterpretationsreferredtointhispublication 293
Appendix II: Common profit and loss account and balance sheet formats from Schedules 1 and 6 297 to the Regulations
Index 302
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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05|CuttingthroughUKGAAP
ThispublicationsummarisestherequirementsofFRS100,FRS101andFRS102andnotesthemaindifferencesbetween
FRS102,previousUKGAAPandEUIFRS.ItdoesnotconsidertheFRSSEanddoesnotdiscussthedisclosurerequirements
ofFRS102inanydetail.
AlthoughitincludesanoverviewoftherequirementsofFRSs100102,thispublicationisaninterpretativeguidetothoseFRSs
thatbuildsonthestandardsandshouldbereadalongsidethem.
ThepublicationisorganisedintochaptersthatgenerallycorrespondtotherelevantsectionofFRS102(Chapters3to35).
Chapters1and2considerFRS100andFRS101respectively.
Thispublicationincludesthefollowingparagraph/sectionreferences:
• x.x(e.g.3.1)–paragraphofthemainbodyinthispublication
• pUKx.x(e.g.pUK3.1)–paragraphofcomparisontopreviousUKGAAPinthispublication
• IFRSx.x(e.g.IFRS3.1)–paragraphofcomparisontoEUIFRSinthispublication
• FRS10x.x.x(e.g.FRS102.3.1)–paragraphoftherelevantstandard
• FRS10x.ACA.xx(e.g.FRS102.ACA.92)–paragraphofAccountingCouncil’sAdviceontherelevantstandard
• FRS10x.GL–glossaryoftherelevantstandard
• Chapterx(e.g.Chapter3Scope, concepts, principles and presentation)–chapterinthispublication
• Sectionx(e.g.Section3Financial statement presentation)–sectionofthestandardFRS102
Acknowledgements
WegratefullyacknowledgeourtechnicalteamintheDepartmentofProfessionalPracticeofKPMGintheUK(UKDPP)as
primaryauthorsofthisbook.TheprojecthasbeenledbyLynnPearcy,KarenFaragher,GinaDesaiandRebeccaWilson.
Other ways KPMG professionals can help
ThispublicationhasbeenproducedbyUKDPP.ThereisarangeofpublicationsandguidancepublishedbyUKDPP
andtheKPMGInternationalStandardsGroupthatisavailablenow(orinduecourse)toassistyoufurther,including:
• Illustrative financial statements preparedunderFRS102;
• Insights into IFRS ,thatprovidespracticalguidanceontheapplicationofIFRS;
• IFRS Handbooks ,thatincludeextensiveinterpretativeguidanceandillustrativeexamplestoelaborateonorclarifythe
practicalapplicationofIFRS;
• disclosurechecklists;
• elearningmodulesonFRSs100102fromtheKPMGLearningAcademy.
Foraccesstoanextensiverangeofaccounting,auditingandfinancialreportingguidanceandliterature,visitKPMG’s
AccountingResearchOnline.Thiswebbasedsubscriptionservicecanbeavaluabletoolforanyonewhowantstostay
informedintoday’sdynamicenvironment.Forafree15daytrial,gotowww.aro.kpmg.comandregistertoday.
For further information see www.kpmg.co.uk or www.kpmg.com/ifrs
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
http://www.aro.kpmg.com/http://www.kpmg.co.uk/http://www.kpmg.com/ifrshttp://www.aro.kpmg.com/http://www.kpmg.co.uk/http://www.kpmg.com/ifrs
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CuttingthroughUKGAAP|06
• ‘CompaniesAct’–CompaniesAct2006
• ‘EUIFRS’–InternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion
• ‘FRC’–FinancialReportingCouncil,theUKregulatorthatissuesUKaccountingstandards
• ‘FRS’–FinancialReportingStandard
• ‘FRSSE’–FinancialReportingStandardforSmallerEntities
• ‘GAAP’–GenerallyAcceptedAccountingPractice/Principles
• ‘IAS’–InternationalAccountingStandard
• ‘IFRIC’–IFRSInterpretationsCommittee(previouslytheInternationalFinancialReportingInterpretationsCommittee)
• ‘IFRS’–InternationalFinancialReportingStandard
• ‘Insights into IFRS ’–KPMG’sInsights into IFRS publication
• ‘LLP’–LimitedLiabilityPartnership
• ‘LLPRegulations’–LimitedLiabilityPartnerships(AccountsandAudit)(ApplicationofCompaniesAct2006)Regulations
2008,StatutoryInstrument2008/1911
• ‘Regulations’–TheLargeandMediumsizedCompaniesandGroups(AccountsandReports)Regulations,Statutory
Instrument2008/410
• ‘SIC’–StandingInterpretationsCommittee
• ‘SORP’–StatementofRecommendedPractice
• ‘SSAP’–StatementofStandardAccountingPractice
• ‘UITF’–UrgentIssuesTaskForce
• ‘UKGAAP’–UnitedKingdomGenerallyAcceptedAccountingPractice/Principles
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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Introduction
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe
LLP and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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9|CuttingthroughUKGAAP
01Application
offinancialreportingrequirements
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe
LLP and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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01Applicationoffinancialreportingrequirements|10
• Dependingoneligibilityandlegalandregulatoryrequirements,UKandIreland
privatesectorentitiesapplyEUIFRS,FRS101orFRS102(withorwithout
reduceddisclosures),ortheFRSSEinpreparingtheirgroupandindividual
financialstatements.
• AnentityapplyingFRS102ortheFRSSEalsoappliesaSORPifrequired
orrelevant.
• Anentitystatestheframeworkitisapplyinginthenotestoits
financialstatements.
• FRSs100,101and102areapplicableforperiodsbeginningonorafter
1January2015.Earlyadoptionispermittedsubjecttocertainconditions.
• TransitionalrequirementsareasspecifiedinFRS100,FRS101andFRS102.
• Qualifyingentitieswithinagroupmayapplyareduceddisclosureframeworkin
theirindividualfinancialstatementsunderFRS101orFRS102.
• Guidanceon‘equivalence’isgivenintheApplicationGuidancetoFRS100.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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11|CuttingthroughUKGAAP
FRS 100
1.1 FRS100setsoutthefinancialreportingrequirementsforUKandIrelandentitiespreparingfinancialstatementsthat
areintendedtogiveatrueandfairview.[FRS100.2]Itdoesnot,however,applytothefinancialstatementsofentities
withinthepublicsector1,whosefinancialreportingframeworkisdeterminedbytheRelevantAuthorities2andis
generallybasedonEUIFRSasadaptedforuseinthepublicsector(seetheForewordtoAccountingStandards
paragraph21).
1.2 FinancialstatementswithinthescopeofFRS100areprepared,dependingoneligibility,inaccordancewitheither
EUIFRS,FRS101Reduced disclosure framework ,FRS102The Financial Reporting Standard applicable in the UK
and Republic of Ireland ,ortheFRSSE.[FRS100.4]
1.3 EUIFRSisappliedwhenrequiredbylaworregulation(forexample,intheconsolidatedfinancialstatementsoffully
listedorAIMcompanies).
1.4
FRS101setsoutareduceddisclosureframeworkthatmaybeappliedintheindividualfinancialstatementsof
qualifyinggroupentities(seeparagraph1.22ofthispublication)thatotherwiseapplytherequirementsofEUIFRS.
ThisframeworkisdiscussedfurtherinChapter2ofthispublication.
1.5 FRS102replacesthepreviousbodyofUKGAAPstandardsandisdiscussedinChapters3to35ofthispublication.
Italsoincludesreduceddisclosureexemptionsforqualifyinggroupentities.
Basis of preparation of financial statements
1.6 Theapplicablestandardsaresummarisedinthefollowingtable.Anyentitycan‘tradeup’andapplya‘higher’
standard(forexample,anentityeligibletoapplytheFRSSEmaychooseinsteadtoapplyFRS102).
Accountingregime Applicableto Example Furtherguidance
EUIFRS • Those required to apply by law
orregulation
• Optional for others
• Group accounts of EU listed and
AIMentities
• Large private group or company
KPMG’sInsights
into IFRS
FRS101 • Individual nancial statements of
qualifyingparentandsubsidiaryentities
•
Parent
company
in
a
listed
or
privategroup
• Subsidiaries in a listed or
privategroup
Chapter2ofthis
publication;seealso
paragraphs1.221.34
foreligibility
FRS102 • Individual and group nancial
statementsoflargeandmediumsized
entities
• Individual and group nancial
statementsofsmallentitieschoosing
nottoapplyFRSSE
• Large and medium private
companiesandgroups
• Parent company in a listed or
privategroup
• Subsidiaries in a listed or
privategroup
Chapters3to35of
thispublication
FRS102
withreduced
disclosures
• Individual nancial statements of
qualifyingparentandsubsidiaryentities
• Parent company in a listed or
privategroup
• Subsidiaries in a listed or
privategroup
Chapters3to35
ofthispublication;
seealsoparagraphs
1.221.34for
eligibility
FRSSE • Eligible small entities • Small private companies
• Small non-company entities
SeeINT.7for
eligibility
1 ThepublicsectorincludesthoseentitiesclassifiedassuchbytheOfficeforNationalStatistics.
2 TheRelevantAuthoritiesintheUKare:HMTreasury,theWelshAssemblyGovernment,theScottishGovernment,theNorthernIrelandAssembly,CIPFA/LASAAC,theDepartmentofHealthandMonitor(IndependentRegulatorforNHSFoundationTrusts).
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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01Applicationoffinancialreportingrequirements|12
Interaction with Companies Act requirements
1.7 FinancialstatementsofacompanypreparedinaccordancewithFRS101,FRS102(withorwithoutreduced
disclosures)ortheFRSSEare‘CompaniesActaccounts’asdefinedbysection395oftheCompaniesAct.Only
thosepreparedunderEUIFRSare‘IASaccounts’.1.8 TheCompaniesActspecifiesthatcharitablecompaniesprepareCompaniesActaccountssotheyarenoteligibleto
applyEUIFRSintheirindividualorgroupaccounts.
1.9 Section407oftheCompaniesActrequirestheindividualfinancialstatementsofUKsubsidiarycompanieswithina
group,wheretheparentpreparesconsolidatedfinancialstatements,tobepreparedonaconsistentbasis(i.e.all
CompaniesActaccountsorIASaccounts)unlesstherearegoodreasonsnotto3.Theindividualfinancialstatements
oftheparentcompanyarepreparedonthesamebasisasthoseofthesubsidiariesexceptwhentheparentcompany
preparesIASgroupaccountsandIASindividualaccounts.Asonlyindividualfinancialstatementspreparedunder
EUIFRSareconsideredtobeIASaccounts,itispossiblefordifferentsubsidiarieswithinagrouptoapplyFRS101
andFRS102(and,ifeligible,theFRSSE)intheirindividualfinancialstatementswithoutbreachingtheCompanies
Actconsistencyrequirement.
1.10 Previously,onceacompanyhadprepareditsconsolidatedorindividualaccountsunderEUIFRS,itcouldnotreverttoUKGAAPinalaterfinancialyearunlesstherewasaspecified‘relevantchangeincircumstances’(e.g.ifthe
company(oritsparent)ceasedtohaveitssecuritiesadmittedtotradingonaregulatedmarketinanEEA4state
[CompaniesActsections395and403]).RecentchangestotheCompaniesActthatapplyforperiodsendingonor
after1October2012havenowalsointroducedafreechoiceforacompanytoreverttoUKGAAP(whichwillinclude
FRS101andFRS102)fromEUIFRSaslongasithasnotinthelastfiveyearspreviouslyrevertedtoUKGAAP
(otherthanasaresultofarelevantchangeincircumstances).
1.11 CertainrequirementsoftheCompaniesActapplyevenwhenthefinancialstatementsarepreparedinaccordance
withEUIFRS.Thisincludesdisclosuresinrelationtorelatedundertakingsanddirectors’benefits,andthe
requirementtoprepareadirectors’reportand(ifapplicable)adirectors’remunerationreport.[FRS100.A2.1819]
Non-companies
1.12
ManyentitiesapplyingFRS100arenotcompaniesandwillneedtoconsiderwhetherthereareanyconflictswiththe
legislationorregulationapplicabletothem.[FRS100.A2.20]TheFRChasconsideredthelegislationfortheformand
contentofaccountsforthefollowingandhasconcludedthattherearenosignificantareasofconflictwithFRS102:
• BuildingSocietiesAct1986;
• CharitiesAct2011;
• CharitiesandTrusteeInvestmentsAct(Scotland)2005;
• CharitiesAct(NorthernIreland)2008;
• FriendlyandIndustrialandProvidentSocietiesAct1968;
• FriendlySocietiesAct1992;and
• TheOccupationalPensionSchemes(RequirementtoobtainAuditedAccountsandaStatementfromthe
Auditor)Regulations1996.
1.13 Certainentitiesmayberequiredtocomplywithadditionalregulationsontopofthelegalrequirementsand
accountingstandards,andsomefallwithinthescopeofSORPs,whichwillbeupdatedtoreflecttherequirements
ofFRS102.[FRS100.A2.21]
3 CharitablecompaniesarenotpermittedtoprepareIASaccountsandarenotrequiredtoapplythesamefinancialreportingframeworkas
noncharitysubsidiaries.
4 TheEuropeanEconomicArea(EEA)comprisesthecountriesoftheEuropeanUnion(EU),plusIceland,LiechtensteinandNorway.ItdoesnotincludetheChannelIslands,theIsleofMan,orGibraltar.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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13|CuttingthroughUKGAAP
Statements of recommended practice (SORPs)
1.14 SORPsareintendedtoimprovecomparabilitybetweenentitieswithinasector.Indevelopingitsaccountingpolicies,an
entityapplyingFRS102ortheFRSSEmayapplyaSORPifitisinscopeofthatSORP(ormayberequiredtodosoby
applicablelaworregulation)ormaychoosetoapplyaSORPthatisrelevanttoitprovidedtheSORPdoesnotconflictwiththerequirementsoftheaccountingstandardapplied.IfanentityappliesaSORPitstatesthisinitsfinancial
statements.AnydeparturesfromtheaccountingordisclosuresoftheSORParedisclosed.[FRS100.58,FRS102.10.5]
Statement of compliance
1.15 Anentityincludesastatementofcomplianceinthenotestoitsfinancialstatementsspecifyingwhetheritis
applyingFRS102,thereduceddisclosureframeworkofFRS102,FRS101ortheFRSSE.Entitiesapplyingfull
EUIFRSarerequiredbyIAS1.16togiveanequivalentstatementofcompliance.[FRS100.9]
Effective date and transition
1.16 FRSs100,101and102areapplicableforperiodsbeginningonorafter1January2015.Earlyadoptionispermitted.
[FRS100.10]However,earlyadoptionofFRS101mayberestrictedforcompaniesthatpreviouslyappliedEUIFRS
intheirindividualfinancialstatementstoperiodsendingonorafter1October2012(seeparagraph1.10ofthispublication).Inaddition,earlyadoptionofFRS102isrestrictedtoperiodsendingonorafter31December2012
and,forentitieswithinthescopeofaSORP,earlyadoptionofFRS102ispermittedonlyifthestandarddoesnot
conflictwiththerequirementsofacurrentSORPorlegalrequirementsforthepreparationoffinancialstatements.
1.17 Ontransitionanentityappliesthefollowing:[FRS100.11]
(a) fortransitiontoEUIFRS–IFRS1–see Insights into IFRS Chapter6;
(b) fortransitiontoFRS101unlesstheentitypreviouslyappliedEUIFRS–IFRS1paragraphs633asamendedby
FRS101.5(b)–seeparagraph2.11ofthispublication;
(c) fortransitiontoFRS101whentheentitypreviouslyappliedEUIFRS–theentitydoesnotreapplyIFRS1but
considerswhetheradjustmentsarenecessarytocomplywithFRS101.5(b)[FRS100.12]–seeparagraph2.12
ofthispublication;
(d)
fortransitiontoFRS102–therequirementsinSection35Transition to FRS 102 –seeChapter35of
thispublication;
(e) fortransitiontotheFRSSE–therearenospecifictransitionrequirementsintheFRSSE.Anentityapplying
theFRSSEforthefirsttimewouldthereforeneedtoapplyallFRSSErequirementsretrospectivelyforany
transactionsorbalancesinthefinancialstatementsatthedateoftransition,excepttotheextentthatanyparts
ofthestandardappliedprospectivelyfromaspecificdate.NotethatFRS100introducedchangestotheFRSSE,
resultinginanewversionoftheFRSSE(effectiveJanuary2015)thatisoutsidethescopeofthispublication.
Equivalence
1.18 FRS100includesapplicationguidanceonequivalencebothforthepurposeofconsideringexemptionfrom
consolidationundersection401oftheCompaniesActandforthepurposeofthedisclosureexemptionspotentially
availableunderFRS101andFRS102(seeparagraphs1.28to1.30ofthispublication).1.19 Undersection401oftheCompaniesAct,aparentcompanythatisthesubsidiaryofanonEEAparentmaybe
exemptfrompreparingconsolidatedfinancialstatementsif(amongotherconditions)itisincludedinahigher
consolidationthatispreparedinamanner‘equivalent’tofinancialstatementspreparedinaccordancewiththe
EUFourthandSeventhDirectives.UITF43previouslyprovidedguidanceonthemeaningofequivalenceforthis
purpose,whichhasnowbeenincludedintheApplicationGuidancetoFRS100.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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01Applicationoffinancialreportingrequirements|14
1.20 TheApplicationGuidanceindicatesthatonlyFRS102andEUIFRSwillautomaticallybeequivalentforthispurpose.
FullIFRSmaybeequivalentsubjecttoconsiderationofthereasonforthedifferencefromEUIFRS.Higher
consolidatedfinancialstatementspreparedunderotherGAAPsrequirespecificconsideration.SomesuchGAAPs
arecloselyrelatedtofullIFRS;fortheseFRS100requiresconsiderationtobegiventodifferencesfromEUIFRS.
Forothersitrequirescomparison,basedontheparticularfacts,withtheSeventhDirective.Inthisrespect,only
thebasicrequirementsoftheFourthandSeventhDirectivesarerequiredtobemet,inparticulartherequirement
togiveatrueandfairview;strictconformitywitheveryprovisionoftheDirectivesisnotnecessary.FRS100does,
however,makespecificreferencetoUS,Canadian,Japanese,Chinese,andSouthKoreanGAAPs.Itobservesthat
theseareconsideredbytheEuropeanCommissiontobeequivalenttoEUIFRS.AlthoughFRS100makesthis
observation,itdoesnotgiveanydefinitivepositiononthoseGAAPs’equivalencetotheSeventhDirective,but
requiresassessmentoftheparticularfactsandadvisesagainstbeingoverlycautious.[FRS100.AG4AG7]
Reduced disclosure frameworks
1.21 FRS101andFRS102offerreduceddisclosureframeworksthatmaybeappliedintheindividualfinancialstatements
ofqualifyingentitiesprovidedcertaincriteriaaremet(seeparagraphs1.22to1.34ofthispublication).Theavailable
disclosureexemptionsarediscussedinChapters2and3ofthispublication.Thereduceddisclosureframeworks
maynotbeappliedinanyconsolidatedfinancialstatements.[FRS101.3,FRS102.1.10]
Definition of qualifying entity
1.22 Aqualifyingentityisamemberofagroupwheretheparentofthatgrouppreparespubliclyavailableconsolidated
financialstatementsthatareintendedtogiveatrueandfairviewandthatmemberisincludedintheconsolidation.
[FRS101.GL,FRS102.GL]
1.23 ThedefinitionofaqualifyingentityforFRS101(butnotforFRS102)purposeshasadditionalwordingthat
excludescharitiesfrombeingqualifyingentities.CharitablecompanieswithinagroupmaynotapplyFRS101
intheirindividualfinancialstatementsbutmay(subjecttomeetingthenecessaryconditions)applythereduced
disclosuresofferedforqualifyingentitiesunderFRS102.[FRS101.GL]
1.24 PartofthedefinitionofaqualifyingentityunderFRS101andFRS102isthattheconsolidatedfinancialstatements
inwhichthegroupentityisincludedare‘intendedtogiveatrueandfairview’.Thisisnotaquestionofwhetherthey
doinfactgiveatrueandfairviewbutwhethertheyareintendedtodoso,presumablyunderlegalorregulatory
requirements.WhentheGAAPappliedintheconsolidatedfinancialstatementsisEUIFRS,fullIFRSorFRS102,
orisconsideredtobeequivalentforthepurposeofsection401oftheCompaniesAct(seeparagraph1.20ofthis
publication),weconsiderthatthisconditionwillbemet.ForotherGAAPsitwillbenecessarytoconsultthewording
oftheapplicablelegalandregulatoryrequirementsinordertodeterminewhethertheconsolidatedfinancial
statementsareintendedtogiveatrueandfairview.
1.25 ‘Includedintheconsolidation’meansthattheentityisincludedintheconsolidatedfinancialstatementsonafull(not
proportional)consolidationbasis.[FRS101.GL,FRS102.GL]Thedefinitionofaqualifyingentityincludesboth
subsidiariesandtheparentofagroup(assumingthatthenecessarycriteriaaremet).
Criteria for applying a reduced disclosure framework
1.26 AqualifyingentitymayapplythereduceddisclosureframeworkofFRS101orFRS102onlyifbothofthefollowing
conditionsaremet:
(a) Itsshareholdershavebeennotifiedinwritingabout,anddonotobjectto,theapplicationofthedisclosure
exemptions.Onlyshareholder(s)holdingfivepercentormoreofthetotalallottedsharesoftheentity,ormore
thanhalfoftheallottedsharesnotheldbytheimmediateparent,areentitledtoserveanobjection.Theentity
specifiesareasonabletimeframeandformatforobjections.[FRS101.5(a),FRS102.1.11(a)]Whilstthiscondition
mayberelativelystraightforwardtomeetinthecaseofawhollyownedsubsidiarywithinagroup,listedultimate
parentcompaniesmayfindthisconditionmorechallenginglogistically.Suchcompanieswillneedtoplan
carefullythemethodbywhichtheywillobtainthispermission,forexampleaspartoftheAnnualGeneral
Meetingprocessorviaaseparatecommunicationwithshareholders.
(b) Thefinancialstatementssummarise(innarrativeform)theexemptionsappliedandidentifytheconsolidated
financialstatementsinwhichtheentityisconsolidated.[FRS101.5(c),FRS102.1.11(c)]
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FRS 101 – consequential amendments to EU-IFRS
1.27 SincefinancialstatementspreparedinaccordancewithFRS101areCompaniesActaccounts(seeparagraph1.7of
thispublication),qualifyingentitiesapplyingFRS101makecertainamendmentstotherequirementsofEUIFRSin
ordertocomplywiththerequirementsoftheCompaniesAct;thesearediscussedinChapter2ofthispublication.[FRS101.5(b)]
Equivalent disclosures
1.28 Certain(butnotall)ofthedisclosureexemptionsavailableinFRS101andFRS102areconditionaluponequivalent
disclosuresbeingincludedintheconsolidatedfinancialstatementsofthegroupinwhichtheentityisconsolidated.
TheApplicationGuidancetoFRS100providesguidanceonthemeaningofequivalenceforthispurpose.
1.29 ThereisnorequirementforthehigherconsolidatedfinancialstatementstobepreparedunderanyspecificGAAP
(subjecttothegeneralrequirementthattheyareintendedtogiveatrueandfairview–seeparagraph1.24ofthis
publication)andonlythebasicdisclosurerequirementsoftherelevantstandardneedtobemet;compliancewith
everydisclosurerequirementofthatstandardisnotrequired.Disclosureexemptionsforqualifyingentitiesare
permittedevenwhenthedisclosuresintheconsolidatedfinancialstatementsaremadeinaggregateorinan
abbreviatedform.However,nodisclosureexemptionisavailableintheindividualfinancialstatementsofaqualifyingentity(subjecttomaterialityconsiderationsattheentitylevel)ifnodisclosureismadeinthehigherconsolidated
financialstatementsonthegroundsofmaterialityfromthatconsolidatedpointofview.[FRS100.AG810]
1.30 Thestandardissilentastowhetherdisclosureisrequiredintheindividualfinancialstatementsofmaterialitemsthat
arepotentiallywithinthescopeofthedisclosureexemptionsbuteliminateonconsolidation(forexample,intragroup
derivatives)andhencearenotthemselvesdisclosedintheconsolidatedfinancialstatements.However,thewording
oftheApplicationGuidancesuggeststhatadisclosureexemptionwouldbeavailableforsuchitemsifdisclosureis
madeintheconsolidatedfinancialstatementsinrelationtoexternalitemsofthesamenature(inthisexample,
externalderivatives).
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01Applicationoffinancialreportingrequirements|16
Financial institutions
1.31 Aqualifyingentitythatisafinancialinstitutionisnotexemptfromdisclosuresinrelationtofinancialinstruments.
[FRS101.7,FRS102.1.9]
1.32 Afinancialinstitutionincludesanyofthefollowing:[FRS101.GL,FRS102.GL]
(a)abankthatis:
(i) afirmwithaPartIVpermission6thatincludesacceptingdepositsand:
thatisacreditinstitution;or
whosePartIVpermissionincludesarequirementthatitcomplieswiththerulesintheGeneralPrudential
sourcebookandthePrudentialsourcebookforBanks,BuildingSocietiesandInvestmentFirmsrelatingto
banks,butwhichisnotabuildingsociety,afriendlysocietyoracreditunion;
(ii)anEEAbankthatisafullcreditinstitution;
(b) abuildingsocietythatisdefinedinsection119(1)oftheBuildingSocietiesAct1986asabuildingsociety
incorporated(ordeemedtobeincorporated)underthatact;
(c)acreditunion,beingabodycorporateregisteredundertheIndustrialandProvidentSocietiesAct1965asacreditunioninaccordancewiththeCreditUnionsAct1979,thatisanauthorisedperson;
(d)acustodianbank,brokerdealerorstockbroker;
(e) anentitythatundertakesthebusinessofeffectingorcarryingoutinsurancecontracts,includinggeneralandlife
assuranceentities;
(f) anincorporatedfriendlysocietyincorporatedundertheFriendlySocietiesAct1992oraregisteredfriendlysociety
registeredundersection7(1)(a)oftheFriendlySocietiesAct1974oranyenactmentthatitreplaced,includingany
registeredbranches;
(g) aninvestmenttrust,IrishInvestmentCompany,venturecapitaltrust,mutualfund,exchangetradedfund,unit
trust,openendedinvestmentcompany(OEIC);
(h)aretirementbenefitplan;or
(i)
anyotherentitywhoseprincipalactivityistogeneratewealthormanageriskthroughfinancialinstruments.
Thisisintendedtocoverentitiesthathavebusinessactivitiessimilartothoselistedabovebutarenot
specificallyincludedinthelistabove.
1.33 Aparententitywhosesoleactivityistoholdinvestmentsinothergroupentitiesisnotafinancialinstitution.
1.34 Asubsidiaryentityengagedsolelyintreasuryactivitiesforthegroupasawholeislikelytomeetthedefinitionofa
financialinstitution.[FRS102.ACA.37]
6 Asdefinedinsection40(4)oftheFinancialServicesandMarketsAct2000.
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LLP and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
02Reduced
disclosureframework
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02Reduceddisclosureframework|18
• FRS101setsoutthedisclosureexemptionsavailableintheindividualfinancial
statementsofqualifyingentitieswithinagroupthatotherwiseapplythe
requirementsofEUIFRS(asmodifiedbyFRS101inordertocomplywiththe
CompaniesAct).
• Aqualifyingentityisamemberofagroupwheretheparentofthatgroup
preparespubliclyavailableconsolidatedfinancialstatementsthatareintended
togiveatrueandfairviewandthatmemberisincludedintheconsolidation.
• FRS101cannotbeappliedinanyconsolidatedfinancialstatements.
• FinancialstatementspreparedunderFRS101areCompaniesActaccounts;
certainamendmentstotherequirementsofEUIFRS(includingtheuseof
CompaniesActformats)arethereforerequiredtoensurecompliancewith
theCompaniesAct.
• Qualifyingentitiesthatarefinancialinstitutionsarenotexemptfromthe
financialinstrumentdisclosurerequirementsofIFRS7andIFRS13.
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FRS 101
2.1 FRS101setsoutthedisclosureexemptionsavailableintheindividualfinancialstatementsofqualifyingentities
withinagroupthatotherwiseapplytherequirementsofEUIFRS(asmodifiedbyFRS101).Aqualifyingentityisa
memberofagroupwheretheparentofthatgrouppreparespubliclyavailableconsolidatedfinancialstatementsthat
areintendedtogiveatrueandfairviewandthatmemberisincludedintheconsolidation.Thedefinitionofa
qualifyingentity,andthegeneralcriteriaforapplyingareduceddisclosureframeworkassetoutinFRS101,is
discussedinparagraphs1.21to1.30ofthispublication.
2.2 QualifyingentitiesthatarerequiredorchoosetoprepareconsolidatedfinancialstatementsmaynotapplyFRS101in
thosefinancialstatements.[FRS101.3]
2.3 EntitiesapplyingFRS101makeastatementofcompliancewiththatstandardinthenotestothefinancial
statements.ItisnotappropriatetoincludeastatementofcomplianceassetoutinIAS1.16sincethefinancial
statementswillnotcomplywithalloftherequirementsofEUIFRS.
Amendments to EU-IFRS requirements
2.4 AsfinancialstatementspreparedunderFRS101areCompaniesActaccounts(seeparagraph1.7ofthispublication),
certainamendmentstotherequirementsofEUIFRSarerequiredinordertocomplywiththeAct.[FRS101.5(b)]
ThesearediscussedintheApplicationGuidancetothestandardandinclude:
• ThepresentationformatsoftheCompaniesActapplyratherthanthoseofIAS1.TherequirementsofIAS1may
beappliedtotheextentthattheydonotconflictwiththeCompaniesActrequirements.
• Thetrueandfairoverrideisappliedinrelationtothenonamortisationofgoodwill.
• Negativegoodwillisnotrecognisedimmediatelyinprofitorloss.Itisinsteadcarriedonthebalancesheetand
recognisedinprofitorlossgenerallyinthesameperiod(s)asthenonmonetaryassetsacquiredarerecovered.
• Contingentconsiderationinabusinesscombinationisaccountedforatitsestimatedamountwhenpaymentis
consideredprobableandtheamountcanbemeasuredreliably,ratherthanbeingincludedatitsfairvalueatthe
acquisitiondate.Changesincontingentconsiderationarerecognisedasanadjustmenttotheacquisitioncost
ratherthanbeingrecognisedinprofitorloss.
• Theanalysisoftheresultsofdiscontinuedoperationsispresentedinacolumnarformatonthefaceofthe
statementofcomprehensiveincome,togetherwithatotalcolumn.
• Onlyrealisedprofitsmayberecognisedinprofitorloss.However,movementsinthevalueoffinancial
instruments,investmentpropertiesandlivinganimalsorplantsmayneverthelessberecognisedinprofitorloss.
• Governmentgrantsrelatedtoassetsarepresentedasdeferredincomeandmaynotbecreditedtothecostofthe
relatedasset.Incomefromgovernmentgrantsispresentedasincomeinprofitorlossandmaynotbenetted
againsttherelatedexpense.
• Animpairmentofgoodwillisreversedif(andonlyif)thereasonsfortheimpairmenthaveceasedtoapply.
2.5 EntitiesthatarenotcompaniesmakethesameamendmentstotherequirementsofEUIFRSifapplying
FRS101.
Disclosure exemptions
2.6 UnderFRS101thereisnorequirementto:[FRS101.8]
• Presentcomparativemovementtablesinrelationtosharenumbers,property,plantandequipment,intangible
assets,investmentpropertiesandbiologicalassets(IASs1,16,38,40,41).
• Presentastatementofcashflows(IAS7).
• Disclosekeymanagementpersonnelcompensation(IAS24).However,forcompanies,disclosureofdirectors’
remunerationisrequiredundertheCompaniesAct(seeparagraph1.11ofthispublication).
• Discloserelatedpartytransactionsbetweenwhollyownedsubsidiariesandparentswithinagroup(thesame
exemptionappliesunderFRS102–seeparagraph33.7ofthispublication)(IAS24).Thisexemptiondoesnot
extendtobalanceswithgrouprelatedpartiesthatarerequiredtobedisclosedundertheCompaniesAct.
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02Reduceddisclosureframework|20
• Presentathirdbalancesheetwhenrestatingcomparativeinformation(IAS1).
• Discloseinformationinrelationtonewstandardsnotyetapplied(IAS8).
• Givecapitalmanagementdisclosures(IAS1)(althoughseeparagraph2.8(b)ofthispublication).
2.7
Inaddition,exemptionfromthefollowingdisclosurerequirementsisavailable,providedthatequivalentdisclosuresareincludedintheconsolidatedfinancialstatements.[FRS101.8]Equivalenceforthispurposeisdiscussedinthe
ApplicationGuidancetoFRS100(seeparagraphs1.28to1.30ofthispublication).
• Detaileddisclosuresinrelationtocertaingroupsharebasedpaymentarrangements(IFRS2).Thisexemptiondoes
notinclude:forasubsidiary,arrangementsoveritsownequityinstruments;orforanultimateparent,
arrangementsthatarenotoveritsownequityinstruments.
• Detaileddisclosuresinrelationtobusinesscombinations,includingcurrentandcomparativeperiodmovement
tablesinrelationtogoodwill(IFRS3).However,movementsingoodwillbalancesareneverthelessrequiredtobe
disclosedundertheCompaniesAct.
• Cashflowdisclosuresinrelationtodiscontinuedoperations(IFRS5).
• Disclosuresinrelationtothekeyassumptionsusedinthedeterminationofrecoverableamountforimpairment
purposes(IAS36).• Financialinstrumentdisclosures(IFRS7)(althoughseeparagraph2.8ofthispublication).
• Disclosuresinrelationtofairvaluemeasurement(IFRS13)(althoughseeparagraph2.8ofthispublication).
2.8 However,anexemptionfromfinancialinstrumentdisclosuresisnotavailableinthefollowingcases:
(a) Ifthequalifyingentityisnotafinancialinstitutionbuthasfinancialinstrumentsheldatfairvalue(otherthan
financialliabilitiesthatareheldatfairvalueaspartofatradingportfolioorarederivatives),certaindisclosure
requirementsofIFRS7andIFRS13aregiveninrelationtothoseinstrumentsinordertocomplywiththe
requirementsoftheCompaniesAct(thisapplieseveniftheentityisnotacompany).[FRS101.6]
(b) Qualifyingentitiesthatarefinancialinstitutions(seeparagraph1.31ofthispublication)cannotapplythe
disclosureexemptionsfromeitherIFRS7,IFRS13(totheextentthattheyapplytofinancialinstruments),orthe
capitalmanagementdisclosuresofIAS1.[FRS101.7]
Effective date and transitional arrangements
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network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
2.9 FRS101isapplicableforperiodsbeginningonorafter1January2015.Earlyadoptionispermitted.However,early
adoptionmayberestrictedtoperiodsendingorafter1October2012forcompaniesthatpreviouslyappliedEUIFRS
intheirindividualfinancialstatements(seeparagraph1.10ofthispublication).
2.10 ThetransitionalrequirementsonadoptionofFRS101aresetoutinFRS100.Thedateoftransitionisthestartofthe
earliestcomparativeperiodpresentedinthefirstfinancialstatementspreparedunderFRS101.[FRS101.GL]
2.11 AqualifyingentitythatdidnotpreviouslyapplyEUIFRSpriortothedateoftransitionappliestherequirementsof
IFRS1.633asadoptedbytheEU,includingtherelevantappendices(asamendedbyFRS101.AG1,thatrequiresa
qualifyingentitytomeasureitsassetsandliabilitiesinaccordancewithFRS101).[FRS100.11(b)]
2.12 AqualifyingentitytransitioningtoFRS101thatappliedEUIFRSpriortothedateoftransitionconsiderswhether
amendmentsarerequiredtocomplywiththeamendmentstoEUIFRSsetoutinFRS101.AG1,butdoesnotreapplytheprovisionsofIFRS1.Whenamendmentstotherecognition,measurementordisclosurerequirementsof
EUIFRSinaccordancewithparagraph5(b)ofFRS101arerequired,theentityconsiderswhethertheamendments
haveamaterialeffectonthefirstfinancialstatementspreparedunderFRS101.Ifthereisnomaterialeffect,the
entitydisclosesthatFRS101hasbeenadoptedandprovidesanarrativesummaryofthedisclosureexemptions
applied.Ifthereisamaterialeffect,theentity’sfirstfinancialstatementspreparedunderFRS101include(foreach
periodpracticable):
(a) adescriptionofthenatureofeachmaterialchangeinaccountingpolicy;
(b) reconciliationsofequityunderEUIFRStothatunderFRS101asatthedateoftransitiontoFRS101andasatthe
endofthelatestperiodpresentedintheentity’smostrecentannualfinancialstatementspreparedunderEU-
IFRS;and
(c)areconciliationofprofitorlossunderEUIFRStothatunderFRS101forthelatestperiodpresentedinthe
entity’smostrecentannualfinancialstatementspreparedunderEUIFRS.[FRS100.12]
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03Scope,concepts,
principlesandpresentation
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03Scope,concepts,principlesandpresentation|22
• Entities,includingpublicbenefitentities,preparingfinancialstatements
intendedtogiveatrueandfairviewapplyFRS102whentheyarenoteligible
orrequiredtoapplyanotherreportingframework(e.g.EUIFRS,FRS101or
FRSSE)orareeligiblebutchoosenottodoso.
• AstatementofcompliancewithFRS102and,ifapplicable,thattheentityisapublicbenefitentity,isgiveninthenotes.
• DeparturesfromFRS102orapplicablelegislation,andthereasonsforit,
aredisclosed.
• IfrelevantanentityappliesIAS33,IFRS8andFRS103(onceissued)in
additiontoFRS102.
• Certaindisclosureexemptionsareavailableforqualifyingentities.
• Theobjectiveoffinancialstatementsistoproviderelevantfinancialinformation
touserstoinformtheireconomicdecisions.
• Financialstatementscomprisestatements(andrelatednotes)showingthefinancialposition,financialperformanceandcashflowsofanentity.
• Financialstatementsareunderstandable,relevant,reliable,prudent,complete,
comparableandtimely.Theyreflectsubstancenotmerelylegalformandare
freefrombias.
• Itemsarerecognisedinanentity’sfinancialstatementswhentheymeetthe
definitionofanasset,liability,incomeorexpense,canbemeasuredreliably
andhaveaprobablefutureeconomicbenefitinfloworoutflow.
• Performanceispresentedinasinglestatementofcomprehensiveincomeora
separateincomestatementandstatementofcomprehensiveincome.
• Incomeandexpensesarerecognisedasaresultofchangesinrecognised
assetsandliabilities.
• FRS102specifiesthebasesofmeasurementforassets,liabilities,incomeand
expensese.g.historicalcostorfairvalue.
• Financialstatements,exceptcashflowinformation,arepreparedonan
accrualsbasis.
• Offsettingofassetsandliabilitiesorofincomeandexpensesisnotallowed
unlessrequiredorpermittedbyFRS102.
• Goingconcernisassessedbymanagementforatleast12months.Inpractice
thislookforwardperiodwillbe12monthsfromthedateofapprovalofthefinancialstatementsduetoauditingstandardrequirements.
• Anymaterialuncertaintiesoranongoingconcernbasisofpreparation
aredisclosed.
• Financialstatementsareusuallypreparedannuallyandonaconsistent
basis.ComparativesaredisclosedexceptwhenFRS102permitsor
requiresotherwise.
• Materialitemsaredisclosedseparatelyandmaterialityisconsideredinthe
financialstatementsaggregationprocess.
• Financialstatementsstatetheentity’sname,periodenddate,presentational
currency,roundinglevelandwhethertheyaregrouporcompanyfinancialstatements.Theyalsodisclosetheregisteredoffice,countryofincorporation
andprincipalactivitiesandoperations.
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23|CuttingthroughUKGAAP
vs previous UK GAAPApplicablestandards:ASBStatementofPrinciples,SSAP25,FRS3,FRS5,FRS28
pUK3.1 TheconceptsandprinciplesoftheASB’sStatement of Principles areinlinewiththosestatedinFRS102.
pUK3.2 FRS5andtheStatement of Principles containspecificguidanceonhowtoapplytheprinciplethattransactionsare
accountedforinaccordancewiththeircommercialsubstance.ApplicationNotestoFRS5applythatprincipletoa
varietyofcomplextransactiontypes.
pUK3.3 Thefollowingaregenerallypresentedasprimarystatements:profitandlossaccount;statementoftotalrecognised
gainsandlosses;balancesheet;and(forcertainentities)acashflowstatement.SeeChapters4to7ofthis
publicationforfurtherguidance.
pUK3.4 MoreentitiesarerequiredtoprovidesegmentalreportingdisclosuresunderSSAP25thanunderFRS102,including
certainlargeprivateentitiesandunlistedpubliclimitedcompanies.ThedetailedrequirementsofSSAP25alsodiffer
fromthoseofIFRS8(whichareappliedbythoserequiredtoprovidesegmentinformationunderFRS102).This
includesthepossibilityofa‘seriouslyprejudicial’exemptionfromdisclosurethatisnotavailableunderIFRS8.
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03Scope,concepts,principlesandpresentation|24
FRS 102
Section3
Scope
3.1 FRS102appliestofinancialstatementsintendedtogiveatrueandfairviewofareportingentity’sfinancialposition
andprofitorloss.SeeChaptersINT,1and2ofthispublicationforthescopeandbackgroundtoFRSs100102.This
appliestobothcompaniesandpublicbenefitandotherentities.CertainparagraphswithinFRS102areprefixedwith
‘PBE’andthoseapplyonlytopublicbenefitentitiesandarenotappliedtoothertypesofentity.
3.2 FRS102appliesforaccountingperiodsbeginningonorafter1January2015.Earlyadoptionispermittedforaccounting
periodsendingonorafter31December2012,exceptforpublicbenefitentities,forwhichearlyadoptionispermitted
onlyifitdoesnotconflictwitheitherthelegalrequirementsforthepreparationofthefinancialstatementsorthe
requirementsofacurrentSORP.[FRS102.1.14]DisclosureisrequiredwhenFRS102isearlyadopted.
3.3 WhenanentitythatappliesFRS102isrequired,orchooses,topreparethefollowingitappliesthefollowingEUIFRSs:
• earningspershare:IAS33[FRS102.1.4]
• segmentalinformation:IFRS8[FRS102.1.5]
3.4 AnentityisrequiredtoapplyIAS33andIFRS8ifitssharesarepubliclytradedorifitfiles,orisintheprocessof
filing,financialstatementswitharegulatorybodyforapublicshareissue.AnentityappliesFRS103Insurance
contracts (onceissued)ifitissuesinsurancecontractsorfinancialinstrumentswithadiscretionaryparticipation
feature;seetheIntroductiontothispublication.[FRS102.1.6]ThereisnorequirementtoapplyIFRS4.
3.5 FRS102doesnotcoverthepresentationofinterimfinancialreportsandifsuchinformationispresented,then
disclosureismadeofthebasisforpreparingandpresentingtheinformation.[FRS102.3.25]TheAccountingStandards
Board’sStatementHalf-yearly financial reports hasbeenwithdrawnandthereisnorequirementforthosereporting
underFRS102toapplyIAS34(andIFRIC10),althoughentitiesmaychoosetodoso.
Reduced disclosures for qualifying group entities
3.6 Thedefinitionofaqualifyingentityisdiscussedinparagraphs1.22to1.25ofthispublication.
3.7 QualifyingentitiesapplyingFRS102mayapplythefollowingdisclosureexemptionsintheirindividualaccounts,
providedtheymeetthecriteriadiscussedinparagraph1.26ofthispublication.Theexemptionsmaynotbeappliedin
anyconsolidatedaccounts.[FRS102.1.12]
( a)Statementoffinancialposition–reconciliationofnumberofsharesoutstanding–FRS102.4.12(a)(iv).
(b)Presentationofacashflowstatement–Section7Statement of cash flows andFRS102.3.17(d).
( c) Sharebasedpayments–FRS102.26.18(b),FRS102.26.1921andFRS102.26.23exceptforagrouparrangement
involvingequityinstrumentsofasubsidiary.
(
d)Disclosureofkeymanagementpersonnelcompensation–FRS102.33.7.
( e)Financialinstruments–FRS102.11.3948AandFRS102.12.2629exceptthat:
qualifyingentitiesthatarefinancialinstitutions(seeparagraph1.32ofthispublication)maynotapplythis
exemption.Notethat,inadditiontothedisclosurerequirementsofSection11Basic financial instruments and
Section12Other financial instruments issues ,suchentitiesgivefurtherfinancialinstrumentdisclosuresasset
outinSection34Specialised activities andChapter34Dofthispublication;
qualifyingentitieswithfinancialliabilitiesheldatfairvalueapplythedisclosurerequirementsofparagraph
FRS102.11.48A.However,financialliabilitiesheldatfairvaluethatarepartofatradingportfolioorarederivatives
cantakeadvantageoftheexemptioninFRS102.1.12(c).
3.8 Theexemptionslistedinparagraphs3.7(c)and(e)ofthispublicationaredependentontheinclusionofequivalent
disclosuresintheconsolidatedfinancialstatementsofthegroupinwhichtheentityisconsolidated.Theapplication
guidancetoFRS100includesfurtherdetailonequivalence.Seeparagraphs1.28to1.30ofthispublication.
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vs EU-IFRSApplicablestandards:IASBFramework,IAS1,IAS34,IFRS8,IFRS13
IFRS3.1 FRS102andEUIFRSarebothbasedontheIASBFramework.However,theFrameworkcontainsconceptsof
capitalandcapitalmaintenancethatarenotdefinedinFRS102.
IFRS3.2 UnderEUIFRS,therearefewerexceptionsfromthepresentationofcomparativeinformation.Forexample,
movementsinproperty,plantandequipmentarealsopresentedforthecomparativeperiod.
IFRS3.3 IAS1requiresanentitytopresentastatementoffinancialposition(balancesheet)asatthebeginningoftheearliest
comparativeperiodwhentheentityappliesanaccountingpolicyretrospectivelyorcorrectsapriorperioderror,or
whenitreclassifiesitemsinitsfinancialstatements.
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03Scope,concepts,principlesandpresentation|26
Concepts and pervasive principles
3.9 FRS102setsouttheconceptsandpervasiveprinciplesthatentitiesconsiderwhenpreparingtheirfinancial
statements,althoughitgoesontonotethatwhentherearespecificrequirementswithinFRS102thatconflictwith
theseprinciples,thenthespecificrequirementsapply.3.10 Theobjectiveoffinancialstatementsistoprovideinformationonthefinancialposition,performanceandcashflows
oftheentitythatisusefultoabroadrangeofusersinmakingeconomicdecisions.[FRS102.2.2]Theyalsoenable
management’sstewardshipofthecompanytobeassessed.[FRS102.2.3]
3.11 Financialstatementsneedtobeunderstandabletouserswithareasonableknowledgeofbusiness,economic
activitiesandaccountingandawillingnesstostudytheinformation.However,relevantinformationmaynotbe
omittedonthegroundsthatitmaynotbeunderstoodbysomeusers.[FRS102.2.4]
3.12 Theinformationincludedinthefinancialstatementsneedstoberelevanttousers’needs.Informationisrelevant
whenitmightinfluencetheeconomicdecisionsofusersbyhelpingthemtoevaluatepast,presentorfuture
events.[FRS102.2.5]
3.13 Iftheomissionormisstatementofapieceofinformation,eitheronitsownorwithothers,couldinfluencethe
economicdecisionsoftheusers,thatinformationismaterial,andthereforerelevant.Materialitydependsonthesize
andnatureoftheomissionormisstatementjudgedinthesurroundingcircumstances.However,itisinappropriateto
make,orleaveuncorrected,immaterialdeparturesfromFRS102inordertoachieveacertainpresentationinthe
financialstatements.[FRS102.2.6]
3.14 Financialstatementsprovidereliableinformationthatisfreefrommaterialerrororbiasandfaithfullyrepresentsall
informationthatuserscouldreasonablyexpectorwhichthefinancialstatementsclaimtoinclude.If,intheselection
andpresentationofinformation,thereisanintentiontoinfluenceusers’judgementordecisionmakinginaparticular
way,thefinancialstatementsarenotfreefrombias.[FRS102.2.7]
3.15 Toenhancethereliabilityoffinancialstatements,transactionsarepresentedaccordingtotheirsubstanceandnotjust
theirlegalform.[FRS102.2.8]
3.16 Whenuncertaintiesexistaroundeventsandconditions,appropriatedisclosureismadeandprudenceisexercisedin
relationtothoseuncertaintiesinpreparingthefinancialstatements.Whenexercisingjudgementaroundestimates
resultingfromconditionsofuncertainty,prudenceistheinclusionofadegreeofcautionsuchthatexpensesandliabilities
arenotunderstatedandassetsandincomearenotoverstated.However,thedeliberateoverstatementofliabilitiesand
expensesorunderstatementofassetsandincomeisnotpermitted;prudencedoesnotpermitbias.[FRS102.2.9]
3.17 Financialstatementsmustbecomplete,whileconsideringmaterialityandcost.Informationmaybecomeunreliableor
nolongerrelevantifanomissioncausesthatinformationtobefalseormisleading.[FRS102.2.10]
3.18 Usersofthefinancialstatementsmustbeabletocompareanentity’sfinancialinformationbothovertimeandtothat
ofotherentitiessothattheyareabletoevaluatetheentity’srelativefinancialperformanceandposition.Therefore,
measurementandpresentationoffinancialinformationmustbeonaconsistentbasisbothfortheentityovertime
andcomparedtootherentities.Theaccountingpoliciesusedinpreparationofthefinancialstatementsandany
changesthereinaredisclosedtoallowuserstounderstandandcomparefinancialstatements.[FRS102.2.11]
3.19 Unduedelayinthereportingoffinancialinformationmaymeanitlosesrelevancetoinfluencetheeconomicdecisions
ofusersandsuchinformationisthereforeprovidedtouserswithadegreeoftimeliness.Theremaybeaneedfor
managementtobalancetheneedfortimeliness,relevanceandreliabilityoffinancialinformationwhenconsidering
howbesttosatisfytheneedsofusers.[FRS102.2.12]
3.20 Thecostofprovidinginformationshouldnotexceedthebenefitsofthatinformation.Judgementisrequiredin
evaluatingthebenefitsandcostsinvolved:thebenefitsmayaccruetoabroadrangeofusers,andthecostsmaynot
bebornebythosesameusers.[FRS102.2.13]Alowercostofcapitalmaybeenjoyedbytheeconomyasawholeif
financialreportinginformationenablescapitalproviderstomakebetterdecisions.Individualentitiesmayalsoenjoy
betteraccesstocapitalmarkets,alowercostofcapital,improvedpublicrelations,orbettermanagementdecisionsas
aresultoffinancialreporting.[FRS102.2.14]
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG
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Financial position
3.21 Therelationshiponaspecificdatebetweenanentity’sassets,liabilitiesandequityaspresentedinthestatementof
financialposition(balancesheet)isitsfinancialposition.Anassetisdefinedasaresourcefromwhichfuture
economicbenefitsareexpectedtoflowasaresultofcontrolobtainedfromapastevent.Aliabilityisapresentobligationarisingfrompasteventsthatisexpectedtobesettledviaanoutflowofeconomicbenefits.Theresidual
interestintheentity’sassetsafterdeductingallliabilitiesisequity.[FRS102.2.15]
3.22 Someitemsmaymeetthedefinitionofanassetorliabilitybutarenotrecognisedinthefinancialstatementsasthey
donotmeettherecognitioncriteriadiscussedinparagraphs3.30to3.32ofthispublication.[FRS102.2.16]
3.23 Anasset’spotential,directlyorindirectly,tocontributetotheflowofcashandcashequivalentstotheentityisits
futureeconomicbenefit.Thecashflowsmaybethroughuseordisposal.[FRS102.2.17]Anassetmayormaynot
havephysicalform;someassetsareintangible.[FRS102.2.18]Theexistenceofanassetdoesnotrelyonarightof
ownership,butmoreontheabilitytocontroltheexpectedfutureeconomicbenefits.[FRS102.2.19]
3.24 Liabilitiesobligeanentitytoactorperforminaparticularmannerbywayofapresentobligationthatmaybeeither
legalorconstructive.Alegalobligationisenforceablebylawandresultsfromcontractualorstatutoryrequirements.
Aconstructiveobligationarisesfromtheentity’sactions,eitherfromanestablishedpatternofpastpractices,publishedpoliciesoracurrentspecificstatementthatindicatestoothersthattheentitywillacceptcertain
responsibilities,suchthatavalidexpectationhasbeenraisedinthoseotherpartiesthattheentitywillfulfil
thoseresponsibilities.[FRS102.2.20]
3.25 Apresentobligationisnormallysettledthroughpaymentofcash,transferofotherassets,provisionofservices,the
replacementwithanotherobligationorconversiontoequity.Itisalsopossibletoextinguishanobligationthroughthe
counterpartywaivingorforfeitingitsrights.[FRS102.2.21]
3.26 Theresidualinterestintheentity’sassetsafterdeductingallitsliabilitiesisequity.Withinthebalancesheet,equity
maybesubclassifiedtoinclude,forexample,shareholdercontributionsandretainedearnings.[FRS102.2.22]
Performance
3.27
Therelationshipbetweenincomeandexpenseinareportingperiodisanentity’sperformance.Itispresentedeitherinasinglestatementofcomprehensiveincomeorintwostatements:anincomestatementandastatementof
comprehensiveincome.[FRS102.2.23]
3.28 Incomeisdefinedasincreasesineconomicbenefitsinthereportingperiodasaresultofinflowsorenhancementsof
assetsordecreasesinliabilitiesthatresultinincreasesinequity.Whentheinflowrelatestoacontributionfromequity
investorsthisisnotincome.[FRS102.2.23(a)]Incomeincludesbothrevenue,thatarisesaspartoftheordinaryactivities
oftheentity(e.g.sales,fees,interest,royalties,dividendsandrent),andgains,thatareitemsotherthanrevenuethat
meetthedefinitionofincome(e.g.thegainonsaleofanitemofproperty,plantandequipment(PP&E)).Gainsare
oftenpresentedseparatelyinthestatementofcomprehensiveincometoaidusers’understanding.[FRS102.2.25]
3.29 Expensesaredecreasesineconomicbenefitsinthereportingperiodasaresultofassetoutflowsoradditional
liabilitiesincurredthatdecreaseequity.Distributionstoequityinvestorsarenotexpenses.[FRS102.2.23(b)]Expenses
includebothamountsthatariseinthecourseoftheentity’sordinaryactivities(e.g.costofsales,wagesand
depreciation)thatresultinanoutflowordepletionofassets,andlosses,thatareotheritemsthatmeetthedefinition
ofexpensesandthatmayariseintheordinarycourseofbusiness(e.g.thelossonsaleofanitemofPP&E).Losses
areoftenpresentedseparatelyinthestatementofcomprehensiveincometoaidusers’understanding.[FRS102.2.26]
Recognition of assets, liabilities, income and expenses
3.30 Anassetisrecognisedinthebalancesheetwhenitiscontrolledbytheentity,theflowoffutureeconomicbenefitsis
probableanditscostorvaluecanbemeasuredreliably.Anassetisnotrecognisedinrespectofexpenditurewhenthe
associatedfutureeconomicbenefitsareallexpectedtobereceivedinthecurrentreportingperiod.Inthiscasethe
amountisreportedasanexpenseinthestatementofcomprehensiveincomeorincomestatement.[FRS102.2.37]
3.31 Aliabilityisrecognisedinthebalancesheetwhenitisanobligationasaresultofapastevent,thesettlementamount
canbemeasuredreliablyandthetransferofeconomicbenefitsinsettlementisprobable.[FRS102.2.39]
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03Scope,concepts,principlesandpresentation|30
3.32 Toassesswhethertheflowofeconomicbenefitsisprobable,theevidenceavailablewhenthefinancialstatements
arepreparedthatrelatestotheconditionsattheendofthereportingperiodisassessed.Theassessmentiseither
madeindividuallyorforagroupofitems,dependingontheirsignificance.[FRS102.2.29]
3.33 Thecostorvalueofanitemisoftenknownorareasonableestimatecanbemade.Ifareasonableestimatecannotbemadetheitemisnotrecognisedinthefinancialstatements.[FRS102.2.30]Anunrecogniseditemmayqualifyfor
recognitionatalaterdateifeventsandcircumstanceschange.[FRS102.2.31]Itmayalsowarrantdisclosureinthe
notestothefinancialstatementswhenitisrelevanttotheevaluationofperformanceorfinancialpositionbyusersof
thefinancialstatements.[FRS102.2.32]
3.34 Therecognitionofincomeandexpensesresultsdirectlyfromtherecognitionandmeasurementofassetsand
liabilities.Income/expenseisrecognisedinthestatementofcomprehensiveincome(orincomestatement)whenan
increase/decreaseinfutureeconomicbenefithasarisenasaresultofanincrease/decreaseinanassetordecrease/
increaseinaliabilitythatcanbemeasuredreliably.[FRS102.2.24,FRS102.2.4142]
3.35 Thearithmeticdifferencebetweenincomeandexpensesistotalcomprehensiveincome.[FRS102.2.43]Profitorloss
isthearithmeticdifferencebetweenincomeandexpensesotherthanincomeorexpensesclassifiedunderFRS102
asothercomprehensiveincome.[FRS102.2.44]Seeparagraph5.3ofthispublication.
3.36 Disclosureoftheaccountingpoliciesusedoradditionalexplanatorymaterialinthenotesdoesnotrectifyfailureto
recogniseanitemthatmeetsthecriteria.[FRS102.2.28]
3.37 Assetsandliabilitiesthatdonotmeettherecognitioncriteriaarenotrecognisedinthebalancesheetregardlessof
applyingthesocalled‘matchingconcept’toitemsinprofitorloss.The‘matchingconcept’referstotherecognitionin
thesameperiodofallgainsandlossesrelatingtothesameoveralltransactionorevent.[FRS102.2.45]
3.38 Contingentassetsarenotrecognisedinthefinancialstatements.However,whentheflowofeconomicbenefits
associatedwithacontingentassetbecomesvirtuallycertaintheassetmeetstheassetrecognitioncriteriaandis
recognised.[FRS102.2.38]
3.39 Acontingentliabilityiseitherapresentobligationthatdoesnotmeettherecognitioncriteriaofaliabilityorisa
possiblebutuncertainobligation.Contingentliabilitiesarenotrecognisedunlessacquiredaspartofabusiness
combination.[FRS102.2.40]Seeparagraph19.10ofthispublication.
Measurement of assets, liabilities, income and expenses
3.40 Assets,liabilities,incomeandexpensesaremeasuredtodeterminetheamountatwhichtheyarerecognisedinthe
financialstatements.FRS102specifiesthemeasurementbasistobeusedfordifferenttypesofassets,liabilities,
incomeandexpense,includinghistoricalcostorfairvalue.[FRS102.2.33]
3.41 Historicalcost,forassets,isthefairvalueatthedateofacquisitionoftheconsiderationgiventoacquiretheasset.
Forliabilitiesthehistoricalcostisthefairvalueoftheproceedsorassetsreceivedinexchangefortheobligationat
thedateofthetransaction.However,insomecasestheamountofcashorcashequivalentsexpectedtobepaidto
settletheobligationmaybeamoreappropriatemeasurement.[FRS102.2.34]
3.42 Amortisedhistoricalcostisthehistoricalcostoftheassetorliabilitylessanyportionofthehistoricalcostalready
recognisedasanexpenseorincome.Fairvalueistheamountatwhichanassetcouldbeexchanged,aliabilitysettled,oranequityinstrumentgrantedcouldbeexchangedbetweenknowledgeable,willingpartiesinanarm’s
lengthtransaction.[FRS102.2.34]
3.43 AssetsandliabilitiesarerecognisedathistoricalcostoninitialrecognitionunlessrequiredbyanothersectionofFRS
102toberecognisedonadifferentmeasurementbasis(e.g.fairvalue).[FRS102.2.46]
3.44 Subsequenttoinitialrecognition,basicfinancialassetsandliabilities(asdefinedinSection11)arerecognisedat
amortisedcostlessimpairment,exceptfor:
• investmentsinnonconvertibleandnonputtablepreferencesharesandnonputtableordinarysharesthatare
publiclytradedorwhosefairvaluecanotherwisebemeasuredreliably;and
• anyfinancialinstrumentthatuponinitialrecognitionwasdesignatedbytheentityasatfairvaluethroughprofitorloss.
3.45
Theseinstrumentsaremeasuredatfairvaluewithchangesinfairvaluerecognisedinprofitorloss.[FRS102.2.47]3.46 Otherfinancialassetsandliabilitiesaremeasuredatfairvaluewithchangesinfairvaluerecognisedinprofitorloss,
unlessFRS102requiresorpermitsanothermeasurementbasissuchasamortisedcost.[FRS102.2.48]
3.47 Mostnonfinancialassetsaresubsequentlymeasuredonadifferentbasisfromtheirinitialmeasurementathistorical
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03Scope,concepts,principlesandpresentation|32
cost,forexamplethecostmodelorrevaluationmodelforproperty,plantandequipment;thelowerofcostandselling
pricelesscoststocompleteandsellforinventories;orthecostorfairvaluemodelforinvestmentsinassociatesand
jointventuresandagriculturalassets.[FRS102.2.4950]
3.48 InvestmentpropertyisrequiredtobemeasuredatfairvalueunderFRS102whenthefairvalueisreadilydeterminablewithoutunduecostoreffort:seeChapter16ofthispublication.[FRS102.2.50]
3.49 Mostliabilitiesotherthanfinancialliabilitiesaresubsequentlymeasuredatthebestestimateoftheamountrequired
tosettletheobligationatthereportingdate.[FRS102.2.51]
Pervasive recognition and measurement principles
3.50 TherecognitionandmeasurementcriteriasetoutinFRS102arebasedonthepervasiveprinciplesthatarederived
fromtheIASB’sFramework for the Preparation and Presentation of Financial Statements (nowcalledtheConceptual
Framework for Financial Reporting )andfromEUIFRS.Whenspecificguidanceonatransactionoreventisnotgiven
inFRS102,theguidanceonthejudgementandselectionofaccountingpoliciesinSection10Accounting policies,
estimates and errors isfollowed(seeparagraph10.2ofthispublication).Afterconsiderationofspecificguidance
withinFRS102,theconceptsandprinciplesofSection2Concepts and pervasive principles ,discussedinthischapter,
arefollowed.[FRS102.2.35]
Accruals basis
3.51 Exceptforcashflowinformation,financialstatementsarepreparedonanaccrualsbasis.Assuch,itemsare
recognisedwhentheymeetthedefinitionsandrecognitioncriteriasetoutinFRS102.[FRS102.2.36]
Offsetting
3.52 AssetsandliabilitiesarenotoffsetunlessrequiredorpermittedbyFRS102.However,measuringassetsnetofa
valuationallowanceisnotoffsetting.Also,ifbuyingandsellingnoncurrentassetsisnotpartoftheentity’snormal
operatingactivities,thenanygainsandlossesondisposaloftheseassetsarereportedbydeductingthecarrying
amountandanysellingexpensesfromtheproceedsofsale.[FRS102.2.52]
Fair presentation
3.53 Financialstatementspresentfairlyanentity’sfinancialposition,financialperformanceandcashflows.Thisrequires
faithfulpresentationofalltransactionsandothereventsandconditionsinaccordancewiththerecognitioncriteriaof
Section2.ApplicationofFRS102isassumedtoresultinafairpresentationoffinancialstatementswhencoupled
withanyadditionaldisclosuresgivenwhentherequirementsofFRS102areinsufficientforuserstounderstandfully
theeffectofcertaintransactions.[FRS102.3.2]
3.54 Fairpresentationisthesameasa‘trueandfairview’asrequiredforcompaniesbysection393oftheCompaniesAct.
3.55 InthenotestothefinancialstatementsanexplicitstatementismadethatthefinancialstatementscomplywithFRS
102whenthisisthecase.[FRS102.3.3]Inaddition,apublicbenefitentitymakesanexplicitandunreservedstatement
thattheyareapublicbenefitentitywhentheyhaveappliedthe‘PBE’prefixedparagraphs.Insomeextremelyrare
cases,compliancewithFRS102orapplicablelegislationmaybesomisleadingthatmanagementbelievesitconflictswiththeobjectiveofthefinancialstatements.[FRS102.3.4]Inthiscase,managementdepartsfromtherequirements
ofFRS102andmakescertaindisclosures,includingthereasonswhytheapplicationoftherequirementsofFRS102
orapplicablelegislationwouldbemisleading.Thisisknownasa‘trueandfairoverride’.[FRS102.3.5]
Going concern
3.56 Managementmakesanassessmentoftheentity’sabilitytocontinueasagoingconcernwhenpreparingfinancial
statements.Unlessmanagementintendsorhasnorealisticalternativebuttoliquidateorceaseoperationsofthe
entity,theentityisagoingconcern.Inmakingthisassessmentallrelevantinformationaboutthefutureisconsidered,
thatcoversaperiodofatleast12monthsfromthedateofapprovalofthefinancialstatements.[FRS102.3.8]
3.57 Ifmaterialuncertaintiesexistthatcastsignificantdoubtontheentity’sabilitytocontinueasagoingconcern,then
thoseuncertaintiesaredisclosed.[FRS102.3.9]
3.58 Ifthefinancialstatementsarenotpreparedonagoingconcernbasis,thenthebasisusedtopreparethefinancial
statementsandthereasonswhytheentityisnotconsideredtobeagoingconcernaredisclosed.[FRS102.3.9]
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03Scope,concepts,principlesandpresentation|34
Frequency of reporting
3.59 Atleastannualpresentationofacompletesetoffinancialstatementsisgenerallyrequired,althoughmoreorless
frequentreportingmayapplyiftheentitychangesitsreportingdate.Iftheperiodislongerorshorterthanoneyear
duetoachangeinreportingdate,thatfactisdisclosedalongwiththerelevantrationale.Thedisclosurealsostatesthatcomparativeinformationmaynotbeentirelycomparable.[FRS102.3.10]
Consistency of presentation
3.60 Thepresentationandclassificationoffinancialstatementsisconsistentyearonyearunless:
• FRS102oranotherapplicableFRSorFRCAbstractrequiresachangeinpresentation;or
• asignificantchangeinthenatureoftheentity’soperationsorareviewofthefinancialstatementsindicatesthata
differentpresentationwouldbemoreappropriate(seeChapter10ofthispublication).[FRS102.3.11]
3.61 Comparativeamountsarereclassifiedwhenachangeinpresentationoccurs,unlessitisimpracticabletodoso.
Disclosureismadeofthenature,amountandreasonforthereclassification.[FRS102.3.12]
Comparatives3.62 ComparativeinformationisalwaysdisclosedforthepreviousreportingperiodunlessFRS102permitsorrequires
otherwise.[FRS102.3.14]Forexample,Section17Property, plant and equipment doesnotrequirethereconciliationof
thecarryingamountatthebeginningandendoftheperiodtobepresentedforthepriorperiod.
Materiality and aggregation
3.63 Eachmaterial(seeparagraph3.13ofthispublication)classofsimilaritemsispresentedseparately.[FRS102.3.15]
Transactionsareaggregateddependingontheirnatureorfunctionandthenclassifiedaslineitemseitherinthe
financialstatementsornotesdependingonmateriality.[FRS102.3.16]Disclosuresneednotbegiveniftheinformation
isnotmaterial.[FRS102.3.16A]
Complete set of financial statements
3.64 Acompletesetoffinancialstatementsincludesastatementoffinancialposition(balancesheet)atthereportingdate,
eitherasinglestatementofcomprehensiveincomeforthereportingperiodoraseparateincomestatement(profit
andlossaccount)andstatementofcomprehensiveincome,astatementofchangesinequityforthereportingperiod,
astatementofcashflowsforthereportingperiod(whenapplicable,seeChapter7ofthispublication)andrelated
notes.[FRS102.3.17]Onthebasisthatcomparativesarerequiredforthepreviousreportingperiod(seeparagraph
3.62ofthispublication),thiseffectivelymeansthatacompletesetoffinancialstatementsincludestwoofeachofthe
abovestatementsandnotes.
3.65 Ifthereisnoothercomprehensiveincomeinthecurrentorcomparativeperiods,theentitymaypresentonlyan
incomestatementratherthananincomestatementandaseparatestatementofcomprehensiveincome.Iftheonly
changestoequityintheperiodsforwhichthefinancialstatementsarepresentedarefromprofitorloss,dividends,and
correctionofpriorperioderrorsorchangesinaccountingpolicy,asinglestatementofincomeandretainedearnings
maybepresentedinplaceofastatementofcomprehensiveincomeandstatementofchangesinequity.[FRS102.3.18]
3.66 Eachfinancialstatement(primarystatement)ispresentedwithequalprominence.[FRS102.3.21]Adifferenttitlemay
beusedtothoseoutlinedinFRS102aslongasitisnotmisleading.[FRS102.3.22]Entitiesarerequiredtocomply
withthefinancialstatementformatsofFRS102andwithcompany(orLLP)lawwherereferredtobyFRS102,except
totheextentthattheserequirementsarenotpermittedbyanystatutoryframeworkunderwhichsuchentitiesreport.
SeeAppendixIIofthispublicationforcommonprofitandlossaccountandbalancesheetformatsundertheAct.
Identification
3.67 Eachfinancialstatementanditsrelatednotesaredistinguishedclearlyfromotherinformationinthesamedocument.
3.68 Thereportingentitynameandanychangesinnameintheperiod,thereportingdateandperiod,thepresentation
currency,thelevelofroundingusedandwhetherthefinancialstatementsaregrouporindividualaredisplayed
prominentlyinthefinancialstatementsandrepeatedasnecessarytoaidunderstanding.Thedomicileandlegal
formoftheentity,countryofincorporationandregisteredaddressaredisclosedinthefinancialstatements
alongsideadescriptionofthenatureoftheentity’soperationsandprincipalactivities.[FRS102.3.2324]
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04Statementof
financialposition(Balancesheet)
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LLP and a member firm of the KPMG network of independent member firms
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04Statementoffinancialposition(Balancesheet)|36
• Thestatementoffinancialposition(whichmayalsobecalledthebalance
sheet)ispresentedinaccordancewiththeCompaniesActformats.This
applieseveniftheentityisnotrequiredtoprepareaccountsinaccordance
withtheCompaniesAct(forexampleanentitythatisnotacompany),unlesstheapplicablelegislationdoesnotpermitthis.
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vs previous UK GAAPApplicablestandards:FRS2,FRS25,FRS28,UITF4
pUK4.1 PreviousUKGAAPalsorequiresthebalancesheettobepresentedinaccordancewiththeCompaniesAct
schedulessothisisnotaGAAPdifferenceforcompanies.Forotherentities,theCompaniesActformatswillapply
underFRS102whereastheywerenotmandatedunderpreviousUKGAAP.AppendixIVtoFRS102detailsother
legalframeworksandtheAccountingCouncildoesnotbelievetheformatsrequiredbytheseframeworksare
inconsistentwithFRS102.
vs EU-IFRSApplicablestandards:IAS1,IAS8,IFRS5
IFRS4.1 IFRS5requirestheseparatepresentationofassetsclassifiedasheldforsaleorassetsandliabilitiesincludedina
disposalgroupheldforsaleeitherinthestatementoffinancialpositionorinthenotes.FRS102containsno
definitionofheldforsaleanditisnotincludedinthedefinitionofdiscontinuedoperations.FRS102requires
separatedisclosureofthedisposalgroupinthenotesonlywhenthereisabindingsaleagreement,whereas
IFRS5disclosureandremeasurementisrequiredalsowhenthesaleishighlyprobable.
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04Statementoffinancialposition(Balancesheet)|38
FRS 102
Section4
4.1 Thebalancesheetispreparedasatanentity’sreportingdate.[FRS102.4.1]
4.2 AnentitypresentsitsbalancesheetinlinewithPart1General Rules and Formats ofeither:
(a)Schedule1totheRegulations(appliestoallentitiesotherthanthoseapplying(b),(c),or(d),unlesslegislation
specifictotheentityrequiresadifferentformat,seeparagraph1.12ofthispublication);
(b) Schedule2totheRegulations(appliestobankingentities1);
(c)Schedule3totheRegulations(appliestoinsuranceentities1);or
(d)Schedule1totheLLPRegulations(appliestoLLPs).
4.3 AgroupbalancesheetispresentedinlinewithSchedule6totheRegulationsorSchedule3totheLLP
Regulations.[FRS102.4.2]
4.4 Eachschedulespecifiesdifferentformatsfortheorderandterminologyforthebalancesheet.Forexample,
Schedule2allowsbankstopresenttheirassetsinorderofliquidity.AppendixIItothispublicationreplicates
Format1fromSchedule1totheRegulations.
4.5 Additionallineitemsarepresentedasnecessarytoaidusers’understandingoftheentity’sfinancialposition.
[FRS102.4.3]TheCompaniesActrequirestheheadingsandsubheadingstobeadaptedwhenthespecialnatureof
theentity’sbusinessrequiresit.
4.6 UndertheAct,andthereforeunderFRS102,creditorsaresplitbetweenamountsduewithinoneyearandamounts
dueafteroneyear.Ifanentitydoesnothaveanunconditionalright,attheperiodend,todefersettlementofaliability
foratleast12monthsafterthereportingdate,thenthatliabilityisclassifiedasduewithinoneyear.[FRS102.4.7]
4.7 DebtorsthataredueaftermorethanoneyeararerequiredbytheRegulationstobeincludedwithincurrentassets(asdefinedbytheAct).Ifthisbalanceissufficientlymaterialtothefinancialstatementsitisdisclosedonthefaceof
thebalancesheetwithincurrentassets,otherwiseitisdisclosedinthenotes.[FRS102.4.4A]
4.8 Detailsofsharecapital,includingthenumberofsharesinissue,aredisclosedeitheronthefaceofthebalancesheet
orinthenotes.[FRS102.4.12]Similarinformationispresentedforanentitywithoutsharecapital,suchasa
partnership,includingtherightsandrestrictionsofeachtypeofequity.[FRS102.4.13]
4.9 Ifabindingsaleagreementforamajordisposalofassets,orofadisposalgroup,isinplaceatthereportingdate,
adescriptionoftheassets(ordisposalgroup)anddetailsofthefactsandcircumstancesofthesalearedisclosed,
inadditiontothecarryingamountoftheassets(ordisposalgroup).Adisposalgroupisagroupofassetsandthe
liabilitiesassociatedwiththemthatwilltogetherbesold,transferredorotherwisedisposedofinasingle
transaction.Thedisposalgroupincludesacquiredgoodwillallocatedtoitinlinewithparagraphs27.20to
27.22ofthispublication.
1 ThedefinitionsofbankingandinsuranceentitiesarefoundintheCompaniesActsections1164and1165respectively.
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05Statementof
comprehensiveincomeandincomestatement
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05Statementofcomprehensiveincomeandincomestatement|40
• Thestatementofcomprehensiveincomecanbepresentedeitherasoneor
twostatements,asapolicychoice.
• Itemsofincomeandexpenditurewithinthestatementofcomprehensive
incomearepresentedinaccordancewiththeCompaniesActprofitandloss
accountformats.Thisapplieseveniftheentityisnotrequiredtoprepare
accountsinaccordancewiththeCompaniesAct(forexampleanentitythatis
notacompany),unlesstheapplicablelegislationdoesnotpermitthis.
• Othercomprehensiveincomeincludescertainforeignexchangegainsand
losses;actuarialgainsandlosses;andchangesinfairvalueofhedginginstruments,property,plantandequipment,investmentsandintangibleassets.
• Theresultsofdiscontinuedoperationsarepresentedseparatelyusinga
columnarapproach.
• Individuallymaterialitemsaredisclosedseparately.
• Extraordinaryitemsarehighlyabnormalandarenotexpectedtooccur
inpractice.
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41|CuttingthroughUKGAAP
vs previous UK GAAPApplicablestandards:FRS3,FRS28
pUK5.1 Theprofitandlossaccountandstatementoftotalrecognisedgainsandlosses(STRGL)cannotbepresentedasone
combinedstatementunderpreviousUKGAAP.TheSTRGLpresentsthetotalofrecognisedgainsandlosses
(incomeandexpense)recognisedintheperiodthatisattributabletoshareholders.Thisstatementincludesboththe
profitorlossrecordedintheprofitandlossaccount,andgainsandlossesrecordedelsewhere,suchasmovements
onarevaluationreserve,unrealisedforeignexchangetranslationdifferencesandactuarialgainsandlosseson
definedbenefitpensionschemes.Iftherearenorecognisedgainsorlossesotherthantheprofitorlossfortheyear,
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