Welcome changes ahead in FRED 67.
Well done FRC. Last month we highlighted that the triennial review has taken place and the FRC in FRED 67 Draft amendments to FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland is proposing a few welcome changes to FRS 102.
The changes proposed were aimed at areas that caused businesses and their advisers problems and included measuring directors’ loans at present value. This proposed amendment is effective now and can be used for accounts filed from now on.
The FRC has said that it recognises that issue of directors’ loans it addresses in FRED 67 should be able to be applied now and that by allowing early adoption before the consultation on FRED 67 and finalisation of the changes it will save many businesses the problems of applying the present value rule for one year and reversing it in the next year. It has stated that businesses with periods beginning on or after 1 January 2016 – so 31 December 2016 year ends – can adopt the treatment as set out in FRED 67 and have allowed small entities, if they wish, to be exempted from paragraph 11.13 which contained the present value treatment.
This is the amendment:
‘The FRC is amending FRS 102 to insert the following (inserted text is underlined):
1.15A A small entity, as an exception to paragraph 11.13, may measure a basic financial liability that is a loan from a director who is a natural person and a shareholder in the small entity (or a close member of the family of that person) initially at transaction price. Subsequently, for the same financial liability, a small entity is also exempt from the final sentence of paragraph 11.14(a).
This amendment is effective immediately with retrospective application available; it shall not be applied directly, or by analogy, to any other transaction, event or condition.’
Article from ACCA In Practice