Diversity

Financial Reporting
47
financial reporting with maintaining
stability and improving the
usability of FRS 102. In explaining
its proposals, the FRC uses the
terms “easier”, “simpler” and “costeffective”,
demonstrating its
commitment to accounts being based
on a financial reporting standard
that is proportionate to the size
and complexity of the entity and
the information needs of users.
The subtitle of FRED 67, which is
Triennial Review 2017: Incremental
Improvements and Clarifications,
further reflects the objective of
maintaining the stability of financial
reporting.
Transitional arrangements
The usual rule of accounting when
accounting policy changes are made
is to restate prior year numbers with
retrospective effect. In recognition
of the effort that having to restate
prior year numbers would involve
where existing accounting policies
are changed as a consequence of
applying the new, less onerous
accounting, FRED 67 proposes some
exemptions from full retrospection.
One of these exemptions relates
to companies within groups that
had to fair value properties rented
out to other group companies under
FRS 102 and that choose to cease fair
valuing under the FRED 67 proposal.
The existing fair value under FRS
102 would be permitted to be carried
forward as a deemed cost on applying
the revised FRS 102. In relation to
investment properties generally,
FRED 67 proposes to remove the
existing exemption where obtaining
values would involve undue cost or
effort, on the ground that all entities
should be able to do so without
undue cost or effort.
FRED 67 also proposes that, for
future acquisitions, companies
need not recognise the additional
intangible assets required by FRS
102. Any additional intangible assets
already recognised under FRS 102 in
past acquisitions would be required
to continue to be recognised, thus
avoiding the need for prior year
restatement. There would also be an
option for companies to recognise
In addition to its proposals to relax aspects
of FRS 102, the FRC also proposes to introduce
into FRS 102 certain areas of accounting on which
FRS 102 is currently silent or where commentators
suggested that its requirements should be clarified.
the wider range of intangible assets
in future acquisitions, subject to
applying this option consistently
to classes of intangible assets and
explaining in the accounts why this
approach has been adopted.
Other proposed changes to FRS 102
In addition to its proposals to relax
aspects of FRS 102, the FRC also
proposes to introduce into FRS 102
certain areas of accounting on which
FRS 102 is currently silent or where
commentators suggested that its
requirements should be clarified.
These include macro-hedging (to be
addressed by cross reference to IAS
39), debt equity swaps, hyperinflation
and transfers of a business in a group
restructuring.
Other incremental improvements
proposed in FRED 67 include
additional guidance on how to apply
the fair value methodology and a
closer alignment of accounting for
share-based payment with IFRS.
An area where FRED 67 proposes
a significant additional disclosure
relates to the Cash Flow Statement.
FRED 67 proposes the inclusion of
a net debt reconciliation, which
has continually been requested by
investors and, indeed, the old FRS 1
required such a reconciliation.
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