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Contents
Section 1: Scope of financial reporting standard 102 1.1 Scope.
1.1.1 Extract from FRS102: Section 1.1-1.2A.
1.2 Basis of preparation of financial statements.
1.2.1 Extract from FRS102: Section 1.3-1.7.
1.2.2.1 The choices available to entities when deciding what paperwork to use.
1.2.2.2 Where entities must apply a particular standard.
1.3 Reduced disclosures for subsidiaries (and ultimate parents) 1.3.1 Extract from FRS102: Section 1.8-1.13. 1.3.2 OmniPro comment
1.3.2.1 Qualifying entity defined.
1.3.2.1.1 What entities are not qualifying entities in practical terms?
1.3.2.2 What are the disclosure exemptions for qualifying entities?
1.3.2.3 What needs to be put in place in order for the disclosure exemption to be claimed?
1.4 Date from which effective and transitional arrangements.
1.4.1 Extract from FRS102: Section 1.14-1.15.
1.4.2.2 July 2015 amendments – where applicable.
1.4.2.3 Amendments to FRS 102 – Triennial review – adaption requirements.
1.4.2.4 Small entity get out for some non-market loans.
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1.3 Reduced disclosures for subsidiaries (and ultimate parents)
1.3.1 Extract from FRS102: Section 1.8-1.13
1.8 A qualifying entity (for the purposes of this FRS) which is not a financial institution may take advantage in its individual financial statements of the disclosure exemptions set out in paragraph 1.12.
1.9 A qualifying entity (for the purposes of this FRS) which is a financial institution may take advantage in its individual financial statements of the disclosure exemptions set out in paragraph 1.12, except for the disclosure exemptions from Section 11 and Section 12 Other Financial Instruments
1.10 A qualifying entity (for the purposes of this FRS) which is required to prepare consolidated financial statements (for example, if the entity is required by section 399 of the Act to prepare consolidated financial statements, and is not entitled to any of the exemptions in sections 400 to 402 of the Act), or which voluntarily chooses to do so, may not take advantage of the disclosure exemptions set out in paragraph 12 in its consolidated financial statements.
1.11 A qualifying entity (for the purposes of this FRS) may take advantage of the disclosure exemptions in paragraph 1.12, in accordance with paragraphs 1.8 to 1.10, provided that:
a) Its shareholders have been notified in writing about, and do not object to, the use of the disclosure exemptions. Objections to the use of the disclosure exemptions may be served on the qualifying entity, in accordance with reasonable specified timeframes and format requirements, by a shareholder that is the immediate parent of the entity, or by a shareholder or shareholders holding in aggregate 5 per cent or more of the total allotted shares in the entity or more than half of the allotted shares in the entity that are not held by the immediate
b) It otherwise applies the recognition, measurement and disclosure requirements of this
c) It discloses in the notes to its financial statements:
i) a brief narrative summary of the disclosure exemptions adopted; and
ii) the name of the parent6 of the group in whose consolidated financial statements its financial statements are consolidated, and from where those financial statements may be
1.12 A qualifying entity (for the purposes of this FRS) may take advantage of the following disclosure exemptions:
a) The requirements of Section 7 Statement of Cash Flows and paragraph 17(d).
b) The requirements of paragraphs, 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) 11.48(c) and 12.26 (in relation to those cross-referenced paragraphs from which a disclosure exemption is available), 27, 12.29(a), 12.29(b), and 12.29 A provided disclosures equivalent to those required by this FRS are included in the consolidated financial statements of the group in which the entity is consolidated.
c) The requirements of paragraphs 18(b), 26.19 to 26.21 and 26.23, provided that for a qualifying entity that is:
i) subsidiary, the share-based payment arrangement concerns equity instruments of another group entity;an ultimate parent, the share-based payment arrangement concerns its own equity instruments and its separate financial statements are presented alongside the consolidated financial statements of the group; and, in both cases, provided that the equivalent disclosures required by this FRS are included in the consolidated financial statements of the group in which the entity is
d) The requirement of paragraph 33.7
1.13 Reference shall be made to the Application Guidance to FRS 100 in deciding whether the consolidated financial statements of the parent provide disclosures which are equivalent to the requirements of this FRS (ie the full requirements of this FRS when not applying the disclosure exemptions) from which relief is provided in paragraph 12.
1.3.2 OmniPro comment
1.3.2.1 Qualifying entity defined
A qualifying entity is defined in FRS 102 as ‘A member of a group where the parent of that group prepares publically available consolidated financial statements which are intended to give a true and fair view (of the assets, liabilities, financial position and profit or loss) and that member is included in the consolidation’.
1.3.2.1.1 What entities are not qualifying entities in practical terms?
In effect the following entities cannot apply the reduced disclosure framework:
- Entities who are not members of a group i.e. individual entities;
- Entities who are members of a group but group consolidated financial statements are not prepared (e.g. due to the group meeting the small company exemptions);
- Parent entities that prepare consolidated financial statements;
- Where the entity is not included in the consolidation of its parent due to it being immaterial to the group etc;
- Where equivalent disclosures are not included in the consolidated financial statements;
- Where disclosures have been included but they have not formed part of the audited figures where the entity is being audited; and
- Entities that are financial
1.3.2.2 What are the disclosure exemptions for qualifying entities?
Where the entity is a qualifying entity the following disclosure exemptions are available:
- No requirement to provide cash flow statements;
- No requirement to provide details of number of shares outstanding at the beginning and end of the year;
- No requirement for key management personnel compensation to be disclosed. However the usual directors remuneration disclosures under company law are required;
- Share based payment disclosures (where shares are given in the parent)*;
- Related party disclosure with 100% owned group companies (available to all groups in any event regardless of whether it meets the qualifying disclosure definition);
- Certain financial instrument disclosures (detailed references in Section 1.12A(c) of FRS 102*. Company law still requires disclosure of:
- Significant assumptions about the valuation models and techniques for financial instruments held at fair value;
- The fair value of instruments in each category and changes in fair value included in the profit and loss or included in the fair value reserve;
- The nature and extent of derivative instruments at fair value, including significant terms that might affect future cash flows;
- A reconciliation of the fair value
*denotes the fact that disclosure exemptions only available where equivalent disclosures are included in the consolidated financial statements.
1.3.2.3 What needs to be put in place in order for the disclosure exemption to be claimed?
As stated in Section 1.11 of FRS 102 before the disclosure exemptions can be claimed the following is required:
- shareholder approval is required;
- recognition, measurement requirements under FRS 102 are applied;
- a disclosure is made in the financial statements detailing the exemptions
Example 1: Disclosure example for a qualifying entity applying reduced disclosure exemptions
‘FRS 102 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in FRS 102 which addresses the financial reporting requirements and disclosure exemptions in the financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of FRS 102. The company is a qualifying entity for the purposes of FRS 102. Note X gives details of the company’s parent and from where its consolidated financial statements prepared in accordance with (insert GAAP) GAAP may be obtained. The company has notified its shareholders in writing about, and they do not object to, the use of disclosure exemptions availed of by the company in these financial statements.’
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Examples Example 1: Disclosure example for a qualifying entity applying reduced disclosure exemptions. Example 2: Disclosure detailing application of July 2015 amendments. Example 3: Disclosure detailing application of July 2015 amendments.
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