FRS 101 and FRS 102 tax overview

New guidance outlines the key tax considerations for companies transitioning from old UK GAAP to the new standards

HMRC has updated its tax overview of FRS 101 and FRS 102. It highlights that the documents provide an overview of the ‘key tax considerations that arise for those companies that transition from old UK GAAP to the new standards’ and also that they have been brought up to date to reflect changes made to the standards. 

It is highlighted in the FRS 101 overview that the ‘primary changes from the original paper are:

  • additional commentary in relation to non-interest bearing loans
  • updated commentary on the application of the Disregard Regulations and Change of Accounting Practice Regulations, reflecting the changes made to these statutory instruments in December 2014
  • accounting commentary updated to reflect the amendments to FRS 101 issued in September 2015 (particularly in respect of the format of the profit and loss account and balance sheet, permitting contingent consideration to be measured at fair value and prohibiting the reversal of impairment losses on goodwill)’.

It is highlighted in the FRS 102 overview that the ‘primary changes from the original paper are:

  • additional commentary in relation to non-interest bearing loans
  • updated commentary on the application of the Disregard Regulations and Change of Accounting Practice Regulations, reflecting the changes made to these statutory instruments in December 2014
  • accounting commentary updated to reflect the amendments to FRS 102 issued in August 2014 and July 2015
  • where applicable it has been updated for any commentary specific to section 1A of FRS 102’.


The overview also highlights the effect in Change of Accounting Practice (COAP) Regulations (SI 2004/3271). It is stated that the ‘COAP Regulations apply to most transitional adjustments arising in respect of loan relationships or derivative contracts from change in accounting practice. As such, the Regulations are applicable to transitions to FRS 101 and FRS 102 in the same way as they applied to transitions to IAS or FRS 26. In most cases, the effect of the Regulations is to spread the transitional adjustment over 10 years, starting with the first period in which the new accounting policy applies.’ 

This section uses an example of an unconnected company with a loan due to be repaid in five years which has ‘non-vanilla’ terms. The example highlights the difference between the closing value and new treatment with the loan valuation at fair value spread over 10 years.