Delay in Changes to UK Accounting Standards: A VAR-Type Intervention
For those who closely follow the intricacies of financial reporting, the recent decision by the Financial Reporting Council (FRC) to delay the proposed amendments to UK accounting standards might draw parallels to the suspenseful moments created by the Video Assistant Referee (VAR) in football. Will any proposed amendments be overturned? Who is the delay going to benefit?
What are the proposed changes to UK Accounting Standards
As a reminder, FRED 82, or the Financial Reporting Exposure Draft 82 proposed some significant changes to FRS 102 and other FRSs. The key proposed changes included in the exposure draft are as follows:
- Leases – the lease accounting requirements in FRS 102 are to be aligned with the on-balance sheet model from IFRS 16 Leases but with some handy simplifications. This move is expected to affect the financial statements of many businesses, particularly those that have more than one significant operating lease. The aim of the change is to provide a clearer financial picture of companies reporting under this standard. Overall, these changes will allow easier comparisons to be made between accounts prepared under UK GAAP and IFRS.
- Revenue – the requirements for revenue recognition in FRS 102 and FRS 105 are to be amended to be based on the five-step model for revenue recognition from IFRS 15 Revenue from Contracts with Customers, with a few user-friendly simplifications. The impact of this change on companies is less easy to predict as it depends on the form of contracts that companies have in place with their customers
Will These Significant Amendments Be Abandoned?
So, the most obvious question is, will either of these significant proposed amendments be abandoned? Are the FRC going to overturn their original decision? It is very unlikely that either of these proposals will be abandoned in their entirety, but it is possible that the FRC will make the lease model more proportionate. Simplifying certain requirements to make it less burdensome and costly to implement for companies preparing accounts under FRS 102. On a similar note, it is possible that the proposed revenue recognition model will be simplified under FRS 105 for similar reasons.
The decision to delay the implementation of the revised accounting standards by the FRC is the correct one. It demonstrates their ability to take onboard feedback and their commitment to the successful adoption of the revised accounting standards. The effective date of the amendments arising from the periodic review will now not be before 1 January 2026.
The Delay in Implementation: A Win for Companies
While the Financial Reporting Council’s decision to delay the proposed amendments to UK accounting standards may feel like an accounting version of VAR, it’s a necessary step. Even if there are no widespread changes made to the initial proposed amendments, the delay gives companies more time to prepare for implementation. Ultimately, this makes the ‘accounting game’ fairer for those involved in preparing financial statements. The extra time can now be spent understanding in detail how companies will be affected by the proposed changes. As a result, action can be taken ‘early doors’ to prepare for any changes. Accounting may not be a football match, but the pursuit of accuracy and fairness remains a common goal.
Ready to navigate the changes in UK accounting standards with confidence? Our team of experts is here to help you understand and implement these changes effectively. Let’s ensure your financial reporting is accurate, fair, and compliant. Contact us today for a comprehensive consultation and let’s secure your company’s financial future together.