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FRED82 – Amendments to FRS102

Posted on: November 6th 2023 · read

Our beloved underlying accounting standard FRS102 is part way through its triennial review and a Financial Reporting Exposure Draft (FRED) number 82 has been released and consulted upon.

The consultation on FRED82 closed in April 2023 and the Financial Reporting Council is expected to issue a revised FRS102 no later than 1 January 2024.

The proposed effective date for these amendments is accounting periods beginning on or after 1 January 2025. So for FE Colleges this will be in force for July 2026 year ends. However be aware that implementation will mean the comparative figures will be restated and so this will affect the year ending July 2025 (the first day of that accounting period being August 2024). So these changes are not that far away.

FRED82 had a large number of suggested amendments but there are two which stand out:

  1. Revenue recognition
  2. Lease accounting

In short, it is expected that a new revenue recognition model will be adopted which includes a 5 step process to recognising income which lends itself more to a performance basis and further away from accrual models.

The second major change is expected to affect operating leases. This will see operating leases which are over 12 months in length come onto the balance sheet with the present value of the lease payments being recognised as an asset and liability.

This change is particularly significant for those watching their financial health scores (current ratio) and banking covenants.

FRED82 also has various other incremental improvements and clarifications such as going concern and dividend disclosures.

Once the draft of FRS102 is released in the new year we will report back in greater detail.

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This insight was previously published in our FE & HE Digest Winter 2023

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