Skip to main content

FRS 102 Summary – Section 3 – Financial Statement Presentation

John Murphy February 4, 2016

Summary

Section 3 explains that the financial statements of an entity shall give a true and fair view, what a complete set of financial statements is and what compliance with FRS 102 requires.

What is different?

Under FRS 102 it gives a choice to call the primary statements a balance sheet or a statement of financial position and a profit and loss account or statement of comprehensive income.

A statement of change in equity is now presented as a primary statement.

FRS 102 makes it clear when assessing going concern the minimum length of the time the directors need to look at in order to meet the definition of the foreseeable future is 12 months from the date of approval of the financial statements. This was not made explicit under old GAAP, however it was applied in practice.

An entity where financial statements comply with the requirements of FRS 102 shall make an explicit and unreserved statement of compliance in the notes.

A public benefit entity applying the specific requirements applicable to the public benefit entities shall make an explicit and unreserved statement that it is a public benefit entity.

What are the key points?

The fundamental principles for the preparation of financial statements that result in the faithful representation of transactions, other events and conditions, are the going concern assumption, consistency of presentation, comparability and materiality.  Where there are doubts about going concern this needs to be stated in the financial statements.

A complete set of financial statements includes each of the following for the current period and the previous comparable period:

  • a statement of financial position (FRS 102 also allows the use of the word balance sheet);
  • either a single statement of comprehensive income or a profit and loss account and a separate statement of comprehensive income where the entity has items posted to other comprehensive income;
  • a statement of changes in equity;
  • a statement of cash flows; and
  • notes to the financial statements which includes an explicit statement that the financial statements have been prepared under FRS 102.

Where financial statements are prepared for periods longer or shorter than one year, the entity must disclose; that fact, the reason for using a longer or shorter period and the fact that comparable amounts presented in the financial statements are not entirely comparable.

Financial statements are required to make clear the name of the reporting entity, the presentational currency, date of the end of the reporting period, whether individual or group accounts are covered and the level of rounding, if any used.

What do accountants need to do?

Be aware of the requirements for FRS 102 financial statements presentation so they can prepare financial statements on this basis and advise clients.

What do companies need to do?

Be aware of the requirements for FRS 102 financial statements presentation and where necessary consult with the company accountant so that the entity prepares financial statements in compliance with FRS 102.