FRS 102 Periodic Review Series – Other changes

The amendments represent the largest revision of the standards since their launch in 2013. They aim to enhance the alignment of UK and Irish GAAP with International Financial Reporting Standards (IFRS).

The majority of the changes come into effect for periods beginning 1 January 2026. Early adoption will be permitted, provided all amendments are applied at the same time.

In this series of web articles, which will be published over the next few months, we will review each of the key changes, providing information on the new accounting and disclosure provisions, and how businesses can prepare for the changes.

This article outlines other changes being made to the Standard, other than the primary changes to revenues and leasing. 

Other changes to the Standard

As well as significant changes to accounting for leases and for revenues from contracts with customers, a number of other changes have been made to the Standard. These changes are more limited in nature, and are likely to only impact certain entities or certain transactions.

However, it is important that preparers are aware of and understand these changes to determine whether any action is required to implement applicable changes as the new Standard is adopted. While the majority of these are effective for periods beginning on or after 1 January 2026, it is important to note that the supplier finance arrangement provisions are effective for periods beginning on or after 1 January 2025. 

We set out the main changes, other than those relating to revenues and leases, below.

Supplier financing arrangements

A supplier financing arrangement arises when a finance provider agrees to pay an entity’s suppliers and the entity agrees to pay the finance provider at the same date as, or a date later than, the suppliers are paid. The effect of these transactions is that the entity obtains extended payment terms (or a supplier benefits from shorter payment terms) than the original invoice offered.  

Where an entity has supplier finance arrangements, the key terms and conditions of the arrangement will need to be disclosed, such as the payment terms, interest charges and any security provided. The carrying amount(s) and associated line item(s) at the end of the period end, along with the range of payment dates for both the underlying trade payables and the financial liabilities entered into with the finance provider, must be disclosed. 

As this is a new requirement, management will need to review their financing agreements to determine whether any meet the definition of a supplier finance arrangement, and ensure they have sufficient information to provide these disclosures. Entities exempt from including a statement of cash flows in their financial statements will also be exempt from this disclosure requirement; where the entity is not small, this exemption is contingent on equivalent disclosures being made in consolidated accounts in which the entity is consolidated.

This specific requirement comes into effect for periods beginning 1 January 2025. Comparative information is not required in the first year an entity adopts these requirements.

Concepts and Pervasive Principles

Section 2 Concepts and Pervasive Principles has been entirely rewritten, to align with the IASB Conceptual Framework published in 2018. 

This section of FRS 102 provides the foundation for all other sections, providing definitions of assets, liabilities, income, expenditure and equity, the requirement to use the accruals basis, the rules around offsetting and other key principles. Where other sections of FRS 102 do not provide accounting requirements for a particular transaction, then the principles included in Section 2 are relied upon to develop an appropriate accounting treatment.

The extensive review of this section is unlikely, in practice, to have a significant impact on initial adoption. However, entities that use this section to develop accounting treatments for bespoke transactions should ensure the new definitions are reviewed and amend their treatment as needed.

Fair value measurement

Section 2A Fair Value Measurement is a new section, replacing the previous Appendix to Section 2. The Section, includes more information and guidance around determining the fair values of assets and liabilities in the majority of cases. It is important to note that the guidance in this section does not apply to Share-based Payments or to Leases, and separate guidance is given within those respective Sections of the Standard.

The definition of fair value has been amended as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”.

The previous version of the Standard gave examples of fair value techniques that could be appropriate; Section 2A now mandates that a valuation technique must be a market approach (based on market transactions), a cost approach (based on current replacement cost) or an income approach (based on expected future performance). 

If an entity has adopted alternative accounting practices in the past, due to lack of guidance in FRS 102, it may need to review that accounting practice in light of new requirements, to determine whether it continues to be appropriate. 

Going concern

An additional paragraph has been introduced to Section 3 Financial Statement Presentation to require management to make an explicit confirmation that the financial statements have been prepared on a going concern basis. In addition, this disclosure must confirm that management has considered information about the future, as well as any significant judgements made in assessing the entity’s ability to continue as a going concern. 

Uncertain tax treatments

Guidance on Recognising and Measuring Uncertain Tax Situations

Section 29 Income Tax has been enhanced to include guidance around accounting for uncertain taxation situations. Examples of such situations could include (dis)agreement by a tax authority of a certain tax treatment or similar treatment used by the entity, or evidence that a tax authority has disagreed with a similar tax treatment used by another entity. It may also apply where there is a judgement around the amount received or payable to settle a particular tax treatment.

The new paragraphs seek to provide clarification on how to apply the recognition and measurement provisions within the section to transactions or circumstances where there may be additional uncertainty.

Assumptions and Methods for Handling Uncertainty

The underlying premise of the inserted paragraphs is that an entity must assume the applicable tax authority will examine all amounts it has a right to examine and have full knowledge of all related information when making such examinations.

The entity then concludes on whether it is probable that the taxation authority will accept an uncertain tax treatment. Where it is not probable that the tax authority will accept an uncertain tax treatment, the entity will reflect the effect of the uncertainty using either the “most likely amount method”, where figures are calculated based on the single most likely amount in a range of possible outcomes, or the “expected value method”, where figures are calculated based on a probability-weighted average of a range of possible outcomes.

Accounting for Changes in Estimates and Policies

Changes to the estimates or judgements made, or a change in relevant facts or circumstances, should be accounted for prospectively, as a change in estimate, in accordance with the requirements of section 10 of FRS 102.

If an entity has adopted alternative accounting practices in the past, due to lack of guidance in FRS 102, it may need to review that accounting practice in light of new requirements, to determine whether it continues to be appropriate. In circumstances where the application of this accounting requirement changes the original policy developed by the client, the new policy should be applied either retrospectively, provided this is possible without the use of hindsight, or through an adjustment to the opening balances at the date of transition to the amended FRS 102 standard, with no restatement of prior year balances.

Further Assistance

For further information, and to find out how Grant Thornton (NI) LLP can assist you in navigating these changes, please contact Louise Kelly, Partner.