(i) In 2012, 2013 and 2014 the Financial Reporting Council (FRC) revised financial reporting standards in the United Kingdom and Republic of Ireland. The revisions fundamentally reformed financial reporting, replacing the extant standards with four Financial Reporting Standards:
(a) FRS 100 Application of Financial Reporting Requirements;
(b) FRS 101 Reduced Disclosure Framework;
(c) FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
(d) FRS 103 Insurance Contracts.
These amendments make limited revisions to FRS 102 in respect of pension obligations.
(ii) The FRC’s overriding objective in setting accounting standards is to enable users of accounts to receive high-quality understandable financial reporting proportionate to the size and complexity of the entity and users’ information needs.
(iii) In meeting this objective, the FRC aims to provide succinct financial reporting standards that:
(a) have consistency with international accounting standards through the application of an IFRS-based solution unless an alternative clearly better meets the overriding objective;
(b) reflect up-to-date thinking and developments in the way entities operate and the transactions they undertake;
(c) balance consistent principles for accounting by all UK and Republic of Ireland entities with practical solutions, based on size, complexity, public interest and users’ information needs;
(d) promote efficiency within groups; and
(e) are cost-effective to apply.
Amendments to FRS 102 – Pension obligations
(iv) After the publication of FRS 102 in March 2013 the FRC issued, in October 2013, a Press Notice 1 addressing the accounting in accordance with EU-adopted IFRS for a ‘schedule of contributions’ payable by an entity to a defined benefit pension plan. Subsequently the FRC received enquiries about the accounting for similar circumstances by entities applying FRS 102.
(v) The issue concerned whether or not an entity applying FRS 102 should have regard to the principles of IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction where it might be relevant to its circumstances. There appeared to be a diversity of views on the matter, and because the potential implications for an entity’s financial statements could be significant the FRC decided to address the matter outside the intended three-yearly review cycle for FRS 102.
(vi) These amnedmnets clarify that, for entities already recognising assets or liabilities for defined benefit plans in accordance with FRS 102, no additional liabilities need be recognised in respect of a 'schedule of contributions', even if such an agreement would otherwise be considered onerous and that disclosure should be made of the future payments to fund a deficit that have been committed.
(vii) These amendmnets also clarify that the effect of restricting the recognition of a surplus in a defined benefit plan, where the surplus is not recoverable, shall be recognised in othe rcomprehensive income, rather than profit or loss
1 FRC PN 089 Findings of the FRC in respect of the accounts of WH Smith Plc for the year ended 31 August 2012.
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