FRC proposes disclosure changes to FRS 101

The Financial Reporting Council (FRC) is consulting on two minor amendments to FRS 101 Reduced Disclosure Framework, identified as part of its annual review of the standard

The latest amendments are intended to improve the consistency of the disclosure exemptions in relation to the statement of cash flows and related disclosures.

One provides an exemption from the disclosure of cash flows required by paragraph 24(b) of IFRS 6 Exploration for and Evaluation of Mineral Resources. This is to reflect the existing exemption from the presentation of a statement of cash flows provided in FRS 101, and is expected to reduce the cost of compliance with FRS 101.

A similar amendment is also proposed to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for qualifying entities.

Paragraph 24(b) of IFRS 6 requires entities to disclose the operating and investing cash flows arising from the exploration for and evaluation of mineral resources. FRS 101 currently provides an exemption from the requirements of IAS 7 Statement of Cash Flows.

The FRC said stakeholder feedback indicated that it is not clear whether qualifying entities can also take an exemption from the disclosure of cash flows required by paragraph 24(b) of IFRS 6 by virtue of the exemption from the requirements of IAS 7.

The exemption from the requirements of IAS 7 was intended to include any disclosures relating to the statement of cash flows. The preparation of certain disclosures linked to the statement of cash flows could lead to costs that are similar to those associated with the preparation of the statement itself.

An exemption from the disclosure of cash flows required by paragraph 24(b) of IFRS 6 is necessary to ensure that the cost savings which arise from the exemption from the requirements of IAS 7 are maintained. Therefore, FRC proposes an exemption from the disclosure of cash flows required by paragraph 24(b) of IFRS 6.

The FRC is also proposing an amendment to the exemption from paragraph 33(c) of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, removing the condition that this exemption is only available when equivalent disclosures are made in the relevant consolidated financial statements of the group in which the entity is consolidated.

This is for consistency with the exemption from the presentation of a statement of cash flows.

Making this change will result in qualifying entities no longer having to meet any conditions to take advantage of this exemption, potentially reducing the cost of compliance with FRS 101.

Paragraph 33(c) of IFRS requires entities to disclose the net cash flows attributable to the operating, investing and financing activities of discontinued operations. FRS 101 currently provides an exemption from this requirement provided that equivalent disclosures are included in the consolidated financial statements of the group. FRS 101 currently provides an exemption from the requirements of IAS 7.

Unlike the exemption from paragraph 33(c) of IFRS 5, the exemption from the requirements of IAS 7 is not subject to equivalent disclosures being included in the consolidated financial statements of the group in which the entity is consolidated. The disclosure exemptions linked to the statement of cash flows should be based on the same conditions as the exemption from the preparation of the statement itself. Therefore, the FRC proposes an amendment to remove the condition from the exemption from paragraph 33(c) of IFRS 5.

However, in its explanation of how it reached its conclusions about annual amendments to the standard, the FRC said that no amendments are required to FRS 101 for the changes to IFRS arising from the two projects carried out by IASB during the year. These related to Definition of a Business (Amendments to IFRS 3) and Definition of Material (Amendments to IAS 1 and IAS 8).

The consultation on the two amendments closes on 16 March 2020.

FRED 73 Draft amendments to FRS 101 Reduced Disclosure Framework 2019/20 cycle

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