FRS 102 – Summarised

This page contains information about FRS 102, which is a financial reporting standard applicable in the UK and Republic of Ireland. It sets out the requirements for preparing financial statements that give a true and fair view of a reporting entity’s financial position and profit or loss.

The standard applies to a wide range of entities, including public benefit entities and small entities. It also includes information on the scope of the standard, the basis of preparation of financial statements, and the application of Statements of Recommended Practice (SORPs).

Additionally, it provides details on reduced disclosures for subsidiaries and transitional arrangements.

Section 1 of FRS 102 outlines the scope of the standard and explains which entities it applies to. It states that FRS 102 applies to financial statements that are intended to give a true and fair view of a reporting entity’s financial position and profit or loss for a period. The section also explains that the standard applies to public benefit entities and other entities, not just to companies. It also provides information on the basis of preparation of financial statements and the application of Statements of Recommended Practice (SORPs). Additionally, it includes information on reduced disclosures for subsidiaries and ultimate parents, as well as the date from which the standard is effective and transitional arrangements.

Section 2 of FRS 102 is titled “Concepts and Pervasive Principles” and it explains the fundamental concepts and principles that underpin the preparation of financial statements. It covers topics such as the objective of financial statements, the qualitative characteristics of useful financial information, the going concern assumption, accrual basis of accounting, materiality, and offsetting. This section also includes a discussion on the elements of financial statements (assets, liabilities, equity, income and expenses) and their recognition criteria. Additionally, it provides guidance on measurement bases (historical cost, current value) and their application. Overall, this section lays out the foundation for understanding and applying the rest of the standard.

Section 3 of FRS 102 is titled “Financial Statement Presentation” and it provides guidance on how to present financial statements in a clear and understandable manner. This section covers topics such as the structure and content of financial statements, the presentation of comparative information, and the presentation of changes in equity. It also includes guidance on how to present information about an entity’s financial performance, including the use of performance measures and the presentation of income and expenses. Additionally, this section provides guidance on the presentation of items in the statement of financial position (balance sheet) and the statement of cash flows. Overall, this section helps ensure that financial statements are presented in a way that is useful to users.

Section 4 of FRS 102 is titled “Statement of Financial Position” and it provides guidance on how to present the statement of financial position (also known as the balance sheet) in a clear and understandable manner. This section covers topics such as the classification of assets and liabilities, the presentation of current and non-current items, and the presentation of equity. It also includes guidance on how to present information about an entity’s financial position, including the use of subtotals and the presentation of items such as investments, property, plant and equipment, and intangible assets. Additionally, this section provides guidance on the disclosure of information about an entity’s financial position in the notes to the financial statements. Overall, this section helps ensure that the statement of financial position provides useful information to users.

Section 5 of FRS 102 is titled “Statement of Comprehensive Income and Income Statement” and it provides guidance on how to present the statement of comprehensive income (which includes the income statement) in a clear and understandable manner. This section covers topics such as the presentation of income and expenses, the classification of items in the income statement, and the presentation of other comprehensive income. It also includes guidance on how to present information about an entity’s financial performance, including the use of subtotals and the presentation of items such as revenue, cost of sales, and finance costs. Additionally, this section provides guidance on the disclosure of information about an entity’s financial performance in the notes to the financial statements. Overall, this section helps ensure that the statement of comprehensive income provides useful information to users.

Section 6 of FRS 102 is titled “Statement of Changes in Equity and Statement of Income and Retained Earnings” and it provides guidance on how to present the statement of changes in equity and the statement of income and retained earnings in a clear and understandable manner. This section covers topics such as the presentation of changes in equity, the presentation of dividends, and the presentation of the effects of changes in accounting policies and corrections of errors. It also includes guidance on how to present information about an entity’s equity, including the use of subtotals and the presentation of items such as share capital, share premium, and reserves. Additionally, this section provides guidance on the disclosure of information about an entity’s equity in the notes to the financial statements. Overall, this section helps ensure that the statement of changes in equity and the statement of income and retained earnings provide useful information to users.

Section 7 of FRS 102 is titled “Statement of Cash Flows” and it provides guidance on how to present the statement of cash flows in a clear and understandable manner. This section covers topics such as the classification of cash flows, the presentation of operating, investing and financing activities, and the presentation of the effects of changes in foreign exchange rates. It also includes guidance on how to present information about an entity’s cash flows, including the use of subtotals and the presentation of items such as interest and dividends. Additionally, this section provides guidance on the disclosure of information about an entity’s cash flows in the notes to the financial statements. Overall, this section helps ensure that the statement of cash flows provides useful information to users

Section 8 of FRS 102 is titled “Notes to the Financial Statements” and it provides guidance on the information that should be included in the notes to the financial statements. This section covers topics such as the general requirements for the presentation of notes, the disclosure of accounting policies, and the disclosure of information about judgements and estimates. It also includes guidance on how to present information about specific items in the financial statements, such as financial instruments, employee benefits, and income taxes. Additionally, this section provides guidance on the disclosure of information about an entity’s operations, such as its business segments and related party transactions. Overall, this section helps ensure that the notes to the financial statements provide useful information to users.

Section 9 of FRS 102 is titled “Consolidated and Separate Financial Statements” and it provides guidance on when an entity should prepare consolidated financial statements and how to account for investments in subsidiaries, associates, and joint ventures in separate financial statements. This section covers topics such as the definition of control, the preparation of consolidated financial statements, and the accounting for non-controlling interests. It also includes guidance on how to present information about an entity’s investments in its separate financial statements, including the use of the equity method and the cost method. Additionally, this section provides guidance on the disclosure of information about an entity’s investments in its consolidated and separate financial statements. Overall, this section helps ensure that consolidated and separate financial statements provide useful information to users.

Section 10 of FRS 102 is titled “Accounting Policies, Estimates and Errors” and it provides guidance on how to select and apply accounting policies, how to account for changes in accounting estimates, and how to correct errors in financial statements. This section covers topics such as the consistency of accounting policies, the use of judgement in selecting and applying accounting policies, and the disclosure of information about changes in accounting estimates. It also includes guidance on how to account for changes in accounting policies and the correction of prior period errors. Additionally, this section provides guidance on the disclosure of information about an entity’s accounting policies and the effects of changes in accounting estimates and errors. Overall, this section helps ensure that financial statements are prepared using appropriate accounting policies and that changes in accounting estimates and errors are accounted for correctly.

Section 11 of FRS 102 is titled “Basic Financial Instruments” and it provides guidance on how to account for basic financial instruments such as cash, trade receivables and payables, loans and investments in non-convertible preference shares and non-puttable ordinary shares. This section covers topics such as the recognition and measurement of basic financial instruments, the derecognition of financial assets and liabilities, and the impairment of financial assets. It also includes guidance on how to present information about basic financial instruments in the financial statements, including the use of amortized cost and the effective interest method. Additionally, this section provides guidance on the disclosure of information about an entity’s basic financial instruments in the notes to the financial statements. Overall, this section helps ensure that basic financial instruments are accounted for correctly and that useful information about them is provided to users.

Section 12 of FRS 102 is titled “Other Financial Instruments Issues” and it provides guidance on how to account for financial instruments that are not covered by Section 11. This includes more complex financial instruments such as derivatives, equity instruments that are puttable or convertible, and financial liabilities that can be settled by the delivery of a variable number of the entity’s own equity instruments. This section covers topics such as the recognition and measurement of these financial instruments, the use of fair value accounting, and hedge accounting. It also includes guidance on how to present information about these financial instruments in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that more complex financial instruments are accounted for correctly and that useful information about them is provided to users.

Section 13 of FRS 102 is titled “Inventories” and it provides guidance on how to account for inventories, which are assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in the rendering of services. This section covers topics such as the measurement of inventories, the cost formulas that can be used to determine the cost of inventories, and the recognition of inventory write-downs. It also includes guidance on how to present information about inventories in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that inventories are accounted for correctly and that useful information about them is provided to users.

Section 14 of FRS 102 is titled “Investments in Associates” and it provides guidance on how to account for investments in associates, which are entities over which the investor has significant influence but not control. This section covers topics such as the definition of significant influence, the use of the equity method to account for investments in associates, and the impairment of investments in associates. It also includes guidance on how to present information about investments in associates in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that investments in associates are accounted for correctly and that useful information about them is provided to users.

Section 15 of FRS 102 is titled “Investments in Joint Ventures” and it provides guidance on how to account for investments in joint ventures, which are arrangements in which two or more parties have joint control. This section covers topics such as the definition of joint control, the use of the equity method to account for investments in joint ventures, and the impairment of investments in joint ventures. It also includes guidance on how to present information about investments in joint ventures in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that investments in joint ventures are accounted for correctly and that useful information about them is provided to users.

Section 16 of FRS 102 is titled “Investment Property” and it provides guidance on how to account for investment property, which is property held to earn rentals or for capital appreciation or both. This section covers topics such as the definition of investment property, the measurement of investment property at fair value or cost, and the recognition of gains and losses on investment property. It also includes guidance on how to present information about investment property in the financial statements and how to disclose information about it in the notes to the financial statements. Overall, this section helps ensure that investment property is accounted for correctly and that useful information about it is provided to users.

Section 17 of FRS 102 is titled “Property, Plant and Equipment” and it provides guidance on how to account for property, plant and equipment (PPE), which are tangible assets that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. This section covers topics such as the recognition of PPE, the measurement of PPE at cost or revalued amounts, and the depreciation of PPE. It also includes guidance on how to present information about PPE in the financial statements and how to disclose information about it in the notes to the financial statements. Overall, this section helps ensure that PPE is accounted for correctly and that useful information about it is provided to users.

Section 18 of FRS 102 is titled “Intangible Assets other than Goodwill” and it provides guidance on how to account for intangible assets, which are identifiable non-monetary assets without physical substance. This section covers topics such as the recognition of intangible assets, the measurement of intangible assets at cost or revalued amounts, and the amortization of intangible assets. It also includes guidance on how to present information about intangible assets in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that intangible assets are accounted for correctly and that useful information about them is provided to users.

Section 19 of FRS 102 is titled “Business Combinations and Goodwill” and it provides guidance on how to account for business combinations, which occur when an entity acquires control of one or more businesses. This section covers topics such as the definition of a business combination, the recognition and measurement of the assets acquired and liabilities assumed in a business combination, and the accounting for goodwill. It also includes guidance on how to present information about business combinations and goodwill in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that business combinations are accounted for correctly and that useful information about them is provided to users.

Section 20 of FRS 102 is titled “Leases” and it provides guidance on how to account for leases, which are contracts that give one party the right to use an asset for a period of time in exchange for payment. This section covers topics such as the classification of leases as finance leases or operating leases, the recognition and measurement of assets and liabilities arising from finance leases, and the accounting for operating lease payments. It also includes guidance on how to present information about leases in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that leases are accounted for correctly and that useful information about them is provided to users.

Section 21 of FRS 102 is titled “Provisions and Contingencies” and it provides guidance on how to account for provisions, which are liabilities of uncertain timing or amount, and contingencies, which are possible assets or liabilities that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events. This section covers topics such as the recognition of provisions, the measurement of provisions at the best estimate of the expenditure required to settle the present obligation, and the accounting for changes in provisions. It also includes guidance on how to present information about provisions and contingencies in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that provisions and contingencies are accounted for correctly and that useful information about them is provided to users.

Section 22 of FRS 102 is titled “Liabilities and Equity” and it provides guidance on how to distinguish between liabilities and equity instruments. This section covers topics such as the definition of a liability and an equity instrument, the classification of financial instruments as liabilities or equity, and the accounting for compound financial instruments that have both liability and equity components. It also includes guidance on how to present information about liabilities and equity in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that liabilities and equity are classified correctly and that useful information about them is provided to users.

Section 23 of FRS 102 is titled “Revenue” and it provides guidance on how to account for revenue, which is the income that arises in the course of an entity’s ordinary activities. This section covers topics such as the recognition of revenue when it is probable that the economic benefits associated with a transaction will flow to the entity and the amount of revenue can be measured reliably, the measurement of revenue at the fair value of the consideration received or receivable, and the accounting for revenue from contracts with customers. It also includes guidance on how to present information about revenue in the financial statements and how to disclose information about it in the notes to the financial statements. Overall, this section helps ensure that revenue is accounted for correctly and that useful information about it is provided to users.

Section 24 of FRS 102 is titled “Government Grants” and it provides guidance on how to account for government grants, which are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. This section covers topics such as the recognition of government grants when there is reasonable assurance that the entity will comply with the conditions attached to them and the grants will be received, the measurement of government grants at the fair value of the asset received or receivable, and the accounting for government grants related to income. It also includes guidance on how to present information about government grants in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that government grants are accounted for correctly and that useful information about them is provided to users.

Section 25 of FRS 102 is titled “Borrowing Costs” and it provides guidance on how to account for borrowing costs, which are interest and other costs that an entity incurs in connection with the borrowing of funds. This section covers topics such as the recognition of borrowing costs as an expense in the period in which they are incurred, the capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, and the suspension of capitalization of borrowing costs during extended periods in which active development is interrupted. It also includes guidance on how to present information about borrowing costs in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that borrowing costs are accounted for correctly and that useful information about them is provided to users.

Section 26 of FRS 102 is titled “Share-based Payment” and it provides guidance on how to account for share-based payment transactions, which are transactions in which the entity receives goods or services as consideration for equity instruments of the entity or by incurring liabilities for amounts based on the price of the entity’s shares or other equity instruments of the entity. This section covers topics such as the recognition of share-based payment transactions when the goods or services received or acquired in a share-based payment transaction qualify for recognition as assets or expenses, the measurement of share-based payment transactions at the fair value of the goods or services received or the fair value of the equity instruments granted, and the accounting for modifications, cancellations and settlements of share-based payment transactions. It also includes guidance on how to present information about share-based payment transactions in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that share-based payment transactions are accounted for correctly and that useful information about them is provided to users.

Section 27 of FRS 102 is titled “Impairment of Assets” and it provides guidance on how to account for the impairment of assets, which occurs when the carrying amount of an asset exceeds its recoverable amount. This section covers topics such as the identification of assets that may be impaired, the determination of the recoverable amount of an asset, and the recognition and measurement of an impairment loss. It also includes guidance on how to present information about impairment losses in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that impairment losses are accounted for correctly and that useful information about them is provided to users.

Section 28 of FRS 102 is titled “Employee Benefits” and it provides guidance on how to account for employee benefits, which are all forms of consideration given by an entity in exchange for service rendered by employees. This section covers topics such as the recognition and measurement of short-term employee benefits, post-employment benefits, other long-term employee benefits, and termination benefits. It also includes guidance on how to present information about employee benefits in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that employee benefits are accounted for correctly and that useful information about them is provided to users.

Section 29 of FRS 102 is titled “Income Tax” and it provides guidance on how to account for income taxes, which are taxes based on taxable profit. This section covers topics such as the recognition and measurement of current tax liabilities and assets, the recognition and measurement of deferred tax liabilities and assets, and the accounting for the tax consequences of transactions and other events. It also includes guidance on how to present information about income taxes in the financial statements and how to disclose information about them in the notes to the financial statements. Overall, this section helps ensure that income taxes are accounted for correctly and that useful information about them is provided to users.

Section 30 of FRS 102 is about how businesses should handle money in different currencies. It explains how to record transactions in the company’s main currency using the exchange rate on the day of the transaction. It also gives guidance on how to present financial statements in a different currency.

Section 31 of FRS 102 is about how businesses should handle their financial statements when their functional currency is the currency of a hyperinflationary economy. This means that the value of money is decreasing very quickly. This section explains how to adjust financial statements to remove the effects of hyperinflation so that they give a true and fair view of the company’s financial position.

Section 32 of FRS 102 deals with how businesses should handle events that occur after the end of the reporting period but before the financial statements are authorized for issue. These events are divided into two categories: adjusting events and non-adjusting events. Adjusting events provide additional evidence about conditions that existed at the end of the reporting period and require changes to be made to the financial statements. Non-adjusting events, on the other hand, are indicative of conditions that arose after the reporting period and do not require changes to be made to the financial statements. However, if non-adjusting events are material, their nature and an estimate of their financial effect should be disclosed in the notes to the financial statements.

Section 33 of FRS 102 deals with related party disclosures. It requires businesses to disclose information about transactions and outstanding balances with related parties. Related parties are individuals or entities that have a close relationship with the business, such as its parent company, subsidiaries, associates, joint ventures, key management personnel and their close family members. The purpose of these disclosures is to provide users of the financial statements with information about the possibility that the business’s financial position and performance may have been affected by its relationships with related parties.

Section 34 of FRS 102 deals with specialised activities. It sets out the reporting requirements for businesses operating in specific industries such as agriculture, extractive activities, service concession arrangements, financial institutions, heritage assets, funding commitments and public benefit entities. This section provides guidance on how these businesses should account for and report their activities in their financial statements.

Section 35 of FRS 102 deals with the transition to FRS 102 for first-time adopters of the standard. It sets out the requirements for how businesses should prepare their first financial statements under FRS 102. This section provides guidance on how to determine the transition date and what exemptions are available to make the transition easier for businesses. It also provides guidance on how to provide comparative information for the prior period in the financial statements.