FRC publishes amendments to FRS 101 and FRS 102
2 Jun 2020
The Financial Reporting Council (FRC) has published minor amendments to FRS 101 Reduced Disclosure Framework to improve consistency in cashflow reporting, along with proposed amendments for FRS 102 – Interest rate benchmark reform (Phase 2)
2 Jun 2020
FRS 101 provides an exemption from the presentation of a statement of cash flows. Some other IFRSs include disclosures related to the statement of cash flows, which the FRC says FRS 101 should also provide an exemption from, on a consistent basis.
The amendments to FRS 101 are the result of the FRC’s annual review of the standard. The first provides an exemption from the disclosure of cash flows required by paragraph 24(b) of IFRS 6 Exploration for and Evaluation of Mineral Resources.
A similar amendment is made to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for qualifying entities.
The amendments to FRS 101 also remove the condition that the disclosure exemption from paragraph 33(c) of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations is only available provided that equivalent disclosures are included in the 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.
The FRC has also issued FRED 74 Draft amendments to FRS 102 – Interest rate benchmark reform (Phase 2). Interest rate benchmarks such as the London Interbank Offered Rate (LIBOR) are being reformed, and it is anticipated that LIBOR will not be available after 2021. This has resulted in increased uncertainty about the long-term viability of some interest rate benchmarks.
The FRC has already amended hedge accounting requirements in FRS 102, with changes which focussed on financial reporting issues arising before the reform of an interest rate benchmark.
Now the standards-setter has produced a second phase of amendments, to provide relief to minimise discontinuities in the accounting for financial instruments and leases, minimise reporting costs, assist entities in providing useful information to users of financial statements and avoid unnecessary discontinuation of hedge accounting as agreements are modified in order to transition to alternative benchmark rates. Entities will account for modifications as if they result from periodic re-estimations of cash flows to reflect changes in market rates of interest.
It is proposed that the amendments to FRS 102 are effective for accounting periods beginning on or after 1 January 2021, with early application permitted.
The comment period ends on 30 September.