What is FRS 102?
FRS 102 is a financial reporting standard applicable in the UK and Republic of Ireland, designed for small to medium-sized entities (SMEs). It defines the framework for preparing and presenting financial statements, offering a simplified and concise set of accounting principles and practices. The standard aims to strike a balance between providing useful information to users of financial statements and reducing the complexity and cost of producing those statements for SMEs.
FRS 102 is part of the suite of Financial Reporting Standards issued by the Financial Reporting Council (FRC) and is intended to replace older UK GAAP (Generally Accepted Accounting Practice) standards.
Examples of FRS 102 in Practice
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Simplified Financial Statements:
- A small manufacturing company in the UK uses FRS 102 to prepare its annual financial statements. This includes a statement of financial position, a statement of comprehensive income, and notes to the accounts, using simplified measurement techniques for assets and liabilities.
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Disclosure Requirements:
- An Irish service-based SME applies FRS 102, ensuring it meets the reduced disclosure requirements compared to larger entities. For instance, it may be exempt from certain detailed disclosures about financial instruments and deferred tax, which are only required of larger companies.
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Revenue Recognition:
- A UK-based retail company recognizes revenue from sales under FRS 102 principles, matching revenue to related expenses and recognizing it when the significant risks and rewards of ownership have transferred to the buyer.
Frequently Asked Questions about FRS 102
What entities are required to use FRS 102?
FRS 102 is primarily aimed at small to medium-sized entities (SMEs) in the UK and the Republic of Ireland, although it can be adopted by other entities not required to use IFRS (International Financial Reporting Standards).
How does FRS 102 simplify financial reporting?
FRS 102 provides simplified measurements and reduced disclosure requirements compared to full IFRS, making it easier and more cost-effective for SMEs to prepare financial statements.
Can larger companies use FRS 102?
Yes, larger companies can opt to use FRS 102, but they would generally be more aligned with the full IFRS if they have more complex transactions and reporting needs.
What are the main areas of FRS 102?
The main areas include general principles (such as the true and fair view), specific accounting treatments (like asset and liability measurements), and disclosure requirements.
How does FRS 102 differ from the previous UK GAAP?
FRS 102 consolidates and simplifies previous UK GAAP standards, providing a more straightforward framework that aligns more closely with IFRS for certain areas while still catering to the needs of smaller entities.
Related Terms
- UK GAAP: Generally Accepted Accounting Practice in the United Kingdom, consisting of accounting standards and other guidance.
- IFRS: International Financial Reporting Standards, which provide a global framework for public company financial reporting.
- Financial Statements: Formal records of the financial activities and position of a business, person, or other entity.
- Disclosure Requirements: Specific information that entities must present in their financial statements.
- Deferred Tax: Tax liability or asset that results from temporary differences between the accounting and tax treatment of transactions.
Online Resources
- Financial Reporting Council (FRC) Official Website
- FRS 102 Full Standard PDF
- Accounting Web Articles on FRS 102
Suggested Books for Further Studies
- “FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland” by Various Authors: A comprehensive guide to FRS 102, including practical applications and examples.
- “Wiley Interpretation and Application of IFRS Standards” by PKF International Ltd: While focused on IFRS, this book provides insights relevant to FRS 102.
- “UK GAAP 2019: Generally Accepted Accounting Practice under UK and Irish GAAP” by Ernst & Young LLP: A detailed examination of UK GAAP and related standards, including FRS 102.
Accounting Basics: “FRS 102” Fundamentals Quiz
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