1. The proposed changes to UK GAAP have important
implications for listed groups, and introduce new options
for parent companies and subsidiaries
What is happening? Highlights
The Accounting Standards Board has proposed replacing The proposed new UK GAAP framework will have a
existing UK GAAP with a new financial reporting regime. number of impacts on listed groups:
Current UK accounting standards would be replaced by a single
standard, 'The Financial Reporting Standard Applicable in the • parent companies and subsidiaries will have a choice
UK and Republic of Ireland' (The FRS). between The FRS and EU-adopted IFRS, and could
benefit from disclosure exemptions
Under the proposals, companies would first look to company • numerous factors will influence the choices to be made.
law and applicable regulations to determine whether they are
required to apply EU-adopted IFRS. If IFRS is not required,
Under the proposals, a listed parent will generally have a choice
then The FRS can be used.
between The FRS, EU-adopted IFRS and, provided that they
meet the conditions to be a 'qualifying entity', the Reduced
An option of EU-adopted IFRS with disclosure exemptions,
Disclosure Framework in its individual accounts.
the Reduced Disclosure Framework, would be introduced for
parent companies and subsidiaries in their individual company
What about my subsidiaries?
accounts, provided that certain conditions are met.
Most subsidiaries of listed parents will have a choice between
applying The FRS or electing to apply either EU-adopted IFRS
This factsheet focuses on the likely impact for listed groups,
or the Reduced Disclosure Framework in their individual
and on the choices which may be available for their parent
accounts.
company and subsidiary individual accounts.
Qualifying subsidiaries will be eligible for exemptions from a
When will these changes happen?
number of disclosure requirements under both The FRS and
The new standards are currently planned to be effective for
the Reduced Disclosure Framework.
accounting periods beginning 1 January 2015 onwards. Early
adoption is likely to be permitted once the final standards are
Conditions for qualifying parent companies
released. The aim is that the standards will be published during
2012. The introduction of the new framework may bring and subsidiaries
advantages for listed groups, and therefore early adoption could To be eligible to take disclosure exemptions, the conditions to
be worth considering. be a 'qualifying entity' must be met. These are:
• the entity is included in consolidated accounts
What would the impact be on the group • the consolidated accounts are publicly available; and
• there is no objection from any shareholder.
accounts?
The proposals will not alter which entities are required to
This definition of a qualifying entity means that the disclosure
prepare IFRS accounts. The group accounts of companies
exemptions would be available to most parent companies and
listed on the London Stock Exchange or AIM are already
subsidiaries of listed groups. There would be no requirement
required to be prepared under EU-adopted IFRS. These
for a particular percentage ownership, as is the case with the
requirements arise from company law and the AIM rules
current cash flow statement exemption which is restricted to
respectively, and there will be no change to these.
90% subsidiaries.
What about parent company individual
Also, although the entity must be included in consolidated
accounts?
accounts which are publicly available, there is no requirement
Currently, many parent company individual accounts continue for these accounts to be prepared under a particular GAAP.
to be prepared under UK GAAP, although those listed on the This would mean that UK subsidiaries of foreign parents could
London Stock Exchange are required to adopt FRS 26 be eligible, even when the group accounts are not prepared
Financial Instruments: Recognition and Measurement and under IFRS or an equivalent GAAP.
the associated IFRS-converged standards.
Factsheet 336 - January 2012