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FRC issues welcome amendment to FRS 102 for loans from Director Shareholders to Small Companies

8th August 2017

The mandatory use of FRS 102 for medium sized and large companies for reporting periods that started on or after 1 January 2015, and small companies the following year introduced some significant changes for those preparing UK GAAP financial statements. These changes, particularly those that introduced new (for UK GAAP at least) principles for recognition of some balances have created much debate amongst accountants.

Since the introduction of the new standard The Financial Reporting Council (“FRC”) has sought feedback on these changes as part of its Triannual review of the FRS 102. Currently the FRC is finalising proposals for amendments which will be introduced for periods starting on 1 January 2019. These amendments are expected to be completed and available for early adoption from December 2017.

In the meantime however the FRC has responded to the concerns of small companies regarding the FRS 102 requirements to recognise loans from director shareholders at present value by introducing an interim measure allowing small companies to recognise loans from director shareholders at transaction value. By recognising such balances as transaction value small companies will avoid the need to discount such loans which has caused particular consternation for financial statement preparers.

In a highly unusual but welcome move, the FRC has made this amendment available immediately with retrospective application available too. The FRC expects this interim change to become permanent once the wider consultation is complete.

For further information please contact your usual haysmacintyre contact or David Cox, Partner (+44 20 7969 5564).