United Kingdom


New UK GAAP is applicable for periods commencing on or after 1 January 2015.  FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland is the main part of the new UK GAAP regime.  FRS 100 explains the framework; FRS 101 allows the individual accounts of qualifying parent and subsidiary entities (as defined) to be prepared under EU-IFRS recognition and measurement but with reduced disclosures from the full IFRS standards. A specialist standard (FRS 103) for insurers applying FRS 102 has been issued, as well as a standard dealing with interim reporting (FRS 104).

Revisions to FRS 100 to FRS 102 were issued in July 2015, the majority of which are applicable for periods commencing on or after 1 January 2016, with early-adoption permitted.


    Accounting regime Applicable to


    • Those required to apply by law or regulation. Optional for others.
    FRS 101 Reduced disclosure framework
    • Individual accounts of qualifying parent and subsidiary entities

    FRS 102

    • Large and medium-sized entities. Optional for others not required to apply EU-IFRS.
    FRS 102 with reduced disclosures
    • Individual accounts of qualifying parent and subsidiary entities

    FRSSE (2015) (withdrawn from 2016)

    • Eligible small entities
    • Micro-entities incorporated under the Companies Act 2006

    FRS 100

    FRS 100 sets out which framework an entity must or may apply. It does not impose EU-IFRSs beyond existing requirements. Some companies that previously applied EU-IFRSs in their individual accounts may be able to change framework (to FRS 101, for example, or to existing UK GAAP). See the October 2012 Financial Reporting Update for more details on this change. 


    FRS 101

    FRS 101 cannot be applied in any group accounts or in the individual accounts of a charity. Since accounts prepared under FRS 101 are Companies Act accounts, they must comply with the accounting requirements of the Act. This means that certain amendments to EU-IFRS must be made by an entity adopting FRS 101. They include:

    • applying the balance sheet and profit and loss account formats of the Act (even if the entity is not a company)*;
    • for business combinations:
    • invoking the true and fair override to support non-amortisation of goodwill;
    • deferring negative goodwill in the balance sheet for gradual release to profit; and
    • accounting for contingent consideration on the old UK GAAP basis (recognise best estimate when probable; adjust to goodwill)*.

    * For periods commencing on or after 1 January 2016, these requirements are revised such that FRS 101 is more closely aligned with EU-IFRS.


    Some of the disclosure exemptions under FRS 101 are contingent on the parent's consolidated accounts giving equivalent disclosures. The meaning of "equivalent" is considered in the application guidance to FRS 100. Fewer disclosure exemptions are available to qualifying entities that are financial institutions (as defined). The exemptions of FRS 101 include certain disclosures for:

    • share-based payment arrangements
    • business combinations
    • cash flow statements
    • related parties


    FRS 102

    FRS 102 is based on the IFRS for SMEs, with amendments for application in the UK. It incorporates some significant differences from EU-IFRS, including:

    • requiring the Companies Act formats to be applied by all entities, including non-companies (more flexible formats are permitted for periods commencing on or after 1 January 2016);
    • requiring the amortisation of goodwill;
    • permitting the expensing of borrowing and development costs;
    • a “timing difference plus” approach to deferred tax; and
    • a different approach to financial instrument accounting.


    The differences from current UK GAAP include:

    • a different approach to financial instrument accounting, including the recognition of derivatives at fair value;
    • recognition of deferred tax on revaluations, rolled over gains and fair value adjustments in a business combination;
    • the recognition of more intangible assets in a business combination; and
    • no multi-employer exemption in relation to group pension schemes: any liability (or asset) is recognised on at least one entity’s individual balance sheet.

    Like FRS 101, FRS 102 includes a reduced disclosure regime which will allow the individual accounts of qualifying parent and subsidiary entities to omit certain disclosures.  Unlike under FRS 101, charities may be qualifying entities under FRS 102.  The disclosure exemptions include cash flow statements, certain group share-based payment disclosures and (unless the qualifying entity is a financial institution) information about financial instruments. Under FRS 102, all financial institutions must make additional disclosures about financial instruments.


    Small and micro-entities

    The FRSSE is withdrawn for periods commencing on or after 1 January 2016 and replaced with:

    • For micro-entities: FRS 105.
    • For other small entities: FRS 102 Section 1A.

    Effective date
    FRSs 100-102 are applicable for accounting periods commencing on or after 1 January 2015.  This will require (for 31 December year ends) a transition balance sheet to be prepared as at 1 January 2014. The July 2015 amendments to the standards may be early-adopted from periods commencing on or after 1 January 2015 and are mandatory for periods commencing on or after 1 January 2016. Early-adoption of the above standards is permitted provided that the corresponding legal changes are also early-adopted. 


    “And it’s not just about the accounting.  We work closely with our colleagues in tax, treasury, pensions and other advisory areas to ensure you get a complete solution to your accounting and business needs” - Sarah Hughes, Director in Accounting Advisory Services


    Your Issues

    • What are the differences between EU-IFRS and FRS 102 - should you adopt a higher tier than you are required to?


    • Your company is converting to EU-IFRS - what are the key accounting differences? Are there choices that may mitigate volatility of reported earnings?  


    • What is the likely impact on distributable reserves and can you take any action now to mitigate the risk of dividend blocks?  


    • What impact will the changes have on reported taxable profits and existing tax planning?  


    • What about the wider business consequences? How will conversion impact performance-related remuneration, loan agreements and other contractual relationships, internal management information and external communication?  


    • Conversion may be a time intensive project – how will your finance team cope with this along with their usual finance roles?  

    Examples of how we can help

    Our team can:


    • perform an initial impact assessment, highlighting the differences between EU-IFRS, FRS 102 and current UK GAAP;


    • identify the key accounting differences and their likely impact on profit or loss;


    • provide advice on how to mitigate the impacts of conversion (e.g. regarding potential ‘dividend blocks’ and minimising profit or loss volatility);


    • work with our tax colleagues to assess the impact of conversion on cash tax and to assist with tax planning;


    • recalculate internal management information, KPIs and forecasts;


    • perform a performance related pay review and bank covenant review;


    • provide resources/secondees to assist with the conversion project.