FRC amends FRS 100, FRS 101, FRS 102, FRS 104 and FRS 105

20 October 2020

The amendment to FRS 101 changes the effective date of an amendment to the definition of a qualifying entity made in July 2019, effectively allowing relevant insurers to continue to apply FRS 101 for a further two years. The revised effective date for the new definition of a qualifying entity is accounting periods beginning on or after 1 January 2023. Consequential amendments have also been made to FRS 100 and FRS 102.

The amendments to FRS 102 and FRS 105, which were consulted on in Financial Reporting Exposure Draft (FRED) 76, introduce explicit requirements for accounting for temporary rent concessions for operating leases occurring as a direct consequence of COVID-19. Amendments have been made to Section 20 Leases of FRS 102 which require entities to recognise changes in operating lease payments that arise from COVID-19-related rent concessions on a systematic basis over the periods that the change in lease payments is intended to compensate. The FRC considers that this would best reflect the economic substance of the benefit of these concessions and their temporary nature and improve the consistency of reporting for users of financial statements. The requirements only apply to temporary rent concessions occurring as a direct consequence of the COVID-19 pandemic, when any reduction in lease payments affects only payments originally due on or before 30 June 2021. A similar amendment has been made to FRS 105. The effective date for these amendments is accounting periods beginning on or after 1 January 2020, with early application permitted.

The amendments to FRS 104, which were consulted in in FRED 75, clarify the requirement to assess the going concern basis of accounting and require the disclosure of any related material uncertainties when preparing interim financial statements in accordance with FRS 104. These amendments address an unintentional difference between FRS 104 and related IFRS requirements. IFRS Standards require management to assess an entity’s ability to continue as a going concern and disclose any related material uncertainties when preparing interim financial statements. Although these requirements are not contained within IAS 34 Interim Financial Reporting they apply to condensed interim financial statements prepared in accordance with IAS 34. FRS 104, which is based on the requirements of IAS 34, did not previously contain any explicit requirements covering the assessment and reporting on the going concern basis of accounting. However FRS 104 currently requires an entity to include a statement that the same accounting policies are applied in the interim financial statements as compared with the most recent annual financial statements, which would include a statement about the going concern basis of accounting. The amendments to FRS 104 introduce requirements covering going concern in a similar way to EU-adopted IFRS Standards. They are intended to ensure consistency in this regard going forward. The amendments are effective for interim periods beginning on or after 1 January 2021, with earlier application permitted.

A press release with links to all of the amendments is available on the FRC website.