Financial statements prepared in accordance with FRS 101 are Companies Act accounts, not IAS accounts. FRS 101 provides a reduced disclosure framework for qualifying entities, by providing exemptions from certain disclosure requirements of IFRS Standards.
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland
The requirements in FRS 102 are based on the IFRS for SMEs Accounting Standard, with some significant amendments made for application in the UK and Republic of Ireland.
The requirements in FRS 103 are based in part on IFRS 4 Insurance Contracts. Significant differences between FRS 103 and IFRS 4 are set out in the Basis for Conclusions to FRS 103. In particular:
As set out in paragraph 7 of the Basis for Conclusions, in seeking an IFRS-based solution, IFRS 4 was used as a basis for FRS 103. However, it was noted that IFRS 4 does not set specific requirements for the underlying recognition and measurement of insurance contracts, reflecting the fact that it was an interim standard issued by the International Accounting Standards Board (IASB) to facilitate harmonisation between jurisdictions pending completion of the second phase of its insurance contracts project. Therefore in developing FRS 103, the text of IFRS 4 was supplemented with some of the existing requirements and practice in accounting for insurance contracts in the UK and Republic of Ireland.
As set out in paragraph 26 of the Basis for Conclusions, there are a small number of areas where IFRS 4 conflicts with the requirements of Schedule 3 to the Regulations, and therefore in developing FRS 103 amendments were made to the text from IFRS 4 to ensure compliance with company law. The three principal examples are:
Equalisation provisions.
Equity treatment for discretionary participation features.
Discounting.
FRS 103 is not based on IFRS 17 Insurance Contracts, which was effective for annual reporting periods beginning on or after 1 January 2023. As set out in paragraph 57A of the Basis for Conclusions, the FRC is likely to wait for several years’ implementation experience before considering alignment.
FRS 104 Interim Financial Reporting
The requirements in FRS 104 are based on the IASB’s IAS 34 Interim Financial Reporting. Significant differences between FRS 104 and IAS 34 are set out in the Basis for Conclusions to FRS 104. In particular, as set out in paragraph 10 (of the Basis for Conclusions):
Disclosures that are not required by FRS 102 have been deleted. For example, certain fair value disclosure requirements that apply under IAS 34 have not been repeated in FRS 104.
Some disclosure requirements, for example those in relation to fair value measurements and business combinations, apply only if the entity would be required to make the same disclosures in the annual financial statements.
Related party disclosures may be omitted for transactions between wholly-owned members of a group since FRS 102 exempts such transactions from disclosure in the annual financial statements.
Disclosure requirements that apply when an entity adopts a new financial reporting framework for the first time have been inserted. Similar disclosures are required under IFRS Accounting Standards, although they are not part of IAS 34.
The annual financial statements disclosure requirements in paragraph 26 of IAS 34 concerning significant changes in estimates reported in an interim period have been deleted because FRS 104 addresses only reporting requirements in interim financial reports.
FRS 102 permits the presentation of simplified primary financial statements in certain circ*mstances. These presentation requirements have been included in FRS 104 to ensure consistency of presentation in the annual and interim financial statements.
Entities that are not required to present a cash flow statement in the annual financial statements are also exempt from this requirement in the interim financial report.
The principle that the frequency of reporting should not affect the measurement of the annual results has been qualified when FRS 102 would prohibit a reversal of an impairment charge. This is consistent with the requirements in IFRIC 10 Interim Financial Reporting and Impairment.
The preparation requirements in paragraph 14 of IAS 34 pertaining to consolidated interim financial reports have been deleted, because entities that apply FRS 104 will generally prepare entity-only annual financial statements and interim financial reports.
FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime
The requirements in FRS 105 are based on FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, adapted for entities following the micro-entities regime. The requirements in FRS 102 were based on the IFRS for SMEs Accounting Standard, with some significant amendments made for application in the UK and Republic of Ireland, as set out above. The Basis for Conclusions to FRS 105 provides more information about how FRS 105 was developed.
IFRS allowed companies to determine whether an intangible asset's useful life is finite or infinite. However, the new UK GAAP establishes that these assets have a finite useful life. If the entity fails to give a reliable estimate of the useful life, then life cannot exceed 10 years.
Rules-based: IFRS is more principles-based than IAS, which means that it provides more general principles and concepts rather than specific rules. IFRS allows more flexibility in how companies report their financial information, while IAS provides more prescriptive guidance.
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The requirements in FRS 102 are based on the IFRS for SMEs Accounting Standard, with some significant amendments made for application in the UK and Republic of Ireland.
Under UK GAAP, operating lease expenses are currently recognised as operating expenses, while finance lease payments are classified as both interest expense and principal repayment. Under IFRS 16, all leases are recognised on the balance sheet, resulting in key financial ratios and metrics changes.
UK GAAP permits capitalizing development costs, granted certain conditions like technical feasibility, commercial viability, and management's commitment are met. US GAAP takes a more conservative route, mandating the expense of development costs as they occur, unless they pass stringent capitalization criteria.
While there are many similarities between these two standards, there are also many important differences. Generally speaking, most UK companies will use the UK GAAP FRS 102 accounting standard to prepare all financial statements.
For example, IAS provides general guidance on topics such as revenue recognition, asset measurement and foreign currency transactions, whereas IFRS provides more detailed guidance on these issues. In addition, IAS focuses more on historical cost accounting, while IFRS focuses on fair value measurement.
IFRS insists on four key principles for preparing financial statements: clarity, relevance, reliability, and comparability. Clarity means making financial statements easy to read and understand.
Ireland is an EU Member State. Consequently, Irish companies listed in an EU/EEA securities market follow IFRSs since 2005. The European Commission (EC) periodically issues a document which summarises the use of options of the IAS Regulation by European Union Member States.
Irish law requires all companies to prepare annual audited financial statements (complying with IFRS Standards), with an audit exemption for dormant companies, companies limited by guarantee, unlimited companies and companies that meet a certain size criteria.
The main accounting frameworks in use in Ireland are: (i) European Union-endorsed IFRS; and (ii) GAAP. In general, companies can choose to apply either IFRS or GAAP when preparing their individual entity financial statements.
UK-adopted international accounting standards are IFRS Standards as issued by the Board with some limited modifications. Required for some and permitted for others. All foreign issuers whose securities are admitted to trading on a UK public market have the option to use IFRS Standards in their financial statements.
Generally Accepted Accounting Practice in the UK (UK GAAP) is the body of accounting standards published by the UK's Financial Reporting Council (FRC).
US GAAP requires that fixed assets are measured at their initial cost; their value can decrease via depreciation or impairments, but it cannot increase. IFRS allows companies to elect fair value treatment of fixed assets, meaning their reported value can increase or decrease as their fair value changes.
UK-adopted international accounting standards are IFRS Standards as issued by the Board with some limited modifications. Required for some and permitted for others. All foreign issuers whose securities are admitted to trading on a UK public market have the option to use IFRS Standards in their financial statements.
Generally Accepted Accounting Practice in the UK (UK GAAP) is the body of accounting standards published by the UK's Financial Reporting Council (FRC).
Except where IFRS Accounting Standards are required to be used, UK companies, other than charities, may choose to prepare their individual and/or group financial statements in accordance with either UK GAAP or IFRS Accounting Standards, subject to the constraints.
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This FRS is a single financial reporting standard that applies to the financial statements of entities that are not applying adopted IFRS, FRS 101 or FRS 105.
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