FRS 102 – brace for change

Think you’ve mastered FRS 102? We have news for you…

Many practitioners have spent the last year getting to grips with the no longer ‘new UK GAAP’ requirements of FRS 102. The changes to the treatments of deferred tax, loans, revaluations etc have had us all scratching our heads but at least now we should be happy that we have conquered the new standard. All we need now is a nice long period of calm with no changes… 

When the original standard was issued in 2013, the published plan was to review FRS 102 every three years, so consultations on changes are now technically due. Unfortunately, most of us have only recently adopted FRS 102, or in fact are only just about to do so, so the fact that it has already been around for three years has gone under the radar. 

The suggested amendments come from the fact that some of the full IFRSs have already been altered and so FRS 102 needs to fall in line. However, the Financial Reporting Council (FRC) also says that feedback received from existing users of FRS 102 is taken into account for proposed improvements. 

The FRC published two Financial Reporting Exposure Drafts (FRED) during 2017. These are known as phase 1 and phase 2

Briefly the changes proposed are:


Phase 1

Phase 2

IFRS 9, Financial Instruments



IFRS 10, Consolidated Financial Statements

YES but limited changes proposed


IFRS 11, Joint Arrangements

YES but limited changes proposed


IFRS 13, Fair Value Measurement

YES but limited changes proposed


IFRS 15, Revenue from Contracts with Customer

YES but limited changes proposed


IFRS 16, Leases



Phase 1 changes are expected to be effective for accounting periods starting on or after 1 January 2019. 

However, phase 2 may be more challenging but its effective date is 2022. 

Briefly the phase 2 proposed changes (note they are not described by FRC as ‘limited’) which may be significant are: 

  • The expected loss model of IFRS 9 is widely regarded as an improvement on IAS 39, on which FRS 102 is based, and was developed in response to the financial crisis. It is this part of IFRS 9 that the FRC considers could be reflected in revisions to FRS 102. The major impact is expected to be on financial institutions.  However, the proposals may affect all entities that have to review and assess the recoverability and carrying value of debtors including loans
  • adoption of the principles relating to IFRS 16, Leases. This was issued in 2016 and is effective for accounting periods beginning on or after 1 January 2019. It has a single model for lessee accounting and requires more leases to be recognised as an asset and a liability than previously. The FRC initially notes that consistency with IFRS 16 would improve the information available to the users of financial statements regarding leases. It may also be more cost-effective than providing additional information to users when it is not included in the financial statements. Therefore the FRC proposes to amend FRS 102 to incorporate the requirements of IFRS 16.