Financial Reporting Exposure Draft 82 amendments to FRS 102 published for consultation

08 March 2023

The Financial Reporting Council (FRC) is currently consulting on Financial Reporting Exposure Draft 82 (FRED 82).

FRED 82 proposes a number of amendments to accounting requirements to reflect changes in International Financial Reporting Standards (IFRS). The proposals include:

  • Changes to revenue recognition, based on the five-step model for revenue recognition from IFRS 15 ‘Revenue from Contracts with Customers’, with appropriate simplifications.
  • Changes to lease accounting requirements, based on the on-balance sheet model from IFRS 16 ‘Leases’, with some simplifications.
  • Changes to fair value measurement definitions to reflect the principles of IFRS 13 ‘Fair Value Measurement’.

The FRC’s decision on whether to align FRS 102 with the expected credit loss model of financial asset impairment from IFRS 9 ‘Financial Instruments’ will be deferred to a further consultation.

Other incremental proposed changes

Changes include a new definition of an asset. Compared to the existing definition of an asset in FRS102, this definition removes the direct link of benefits to cashflows or equivalents. 

The FRC commented that “stakeholders sought additional guidance regarding the capitalisation of asset enhancements intended to provide climate or other ESG benefits. The amendments proposed to Section 2 introduce a new definition of an asset. This sets out examples of rights that have the potential to produce economic benefits, including a right to use a physical object. The FRC does not propose to make amendments to Section 17 at this time in relation to this issue.”

Registered providers should seek further clarity from the FRC on this.

The Housing SORP Working Party is also looking at how these changes to Section 2 and Section 17 impact ongoing discussions around building safety work such as capitalisation, provisions and impairment.

Next steps

The proposal is for amendments to be effective for accounting periods beginning on or after 1 January 2025. We encourage the sector to submit their responses to the consultation which closes on 30 April 2023.

Alongside this will be a re-write of the Housing SORP, with a consultation on the planned changes expected in 2024.