by In the UK, there are two primary sets of accounting standards: UK Generally Accepted Accounting Practice (UK GAAP) and International Financial Reporting Standards (IFRS).
UK Generally Accepted Accounting Practice (UK GAAP):
UK GAAP is a set of accounting standards that were traditionally used by UK companies before the adoption of IFRS. However, since 2015, UK GAAP has undergone significant changes, with the introduction of Financial Reporting Standards (FRS). The current UK GAAP framework consists of three main standards:
- FRS 100: Application of Financial Reporting Requirements: FRS 100 provides guidance on the overall application of UK GAAP and outlines the criteria for selecting the appropriate accounting framework.
- FRS 101: Reduced Disclosure Framework: FRS 101 allows qualifying entities to apply IFRS-based financial statements with reduced disclosure requirements. This option is typically utilized by subsidiaries of listed companies or entities with public accountability.
- FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland: FRS 102 is the main standard within UK GAAP and is based on the IFRS for Small and Medium-sized Entities (IFRS for SMEs). FRS 102 sets out the accounting principles for the preparation of financial statements for entities that do not apply IFRS or FRS 101.
UK GAAP, including FRS 102, is primarily used by small and medium-sized companies, unlisted companies, and entities that are not required to adopt IFRS.
International Financial Reporting Standards (IFRS):
IFRS is a set of globally recognized accounting standards developed and maintained by the International Accounting Standards Board (IASB). IFRS is widely used by listed companies and large entities in the UK, as well as in many other countries around the world. The adoption of IFRS in the UK is primarily driven by EU regulations.
IFRS aims to provide consistent and transparent financial reporting across different jurisdictions. It covers various aspects of financial reporting, including recognition, measurement, presentation, and disclosure of financial statements.
The Financial Reporting Council (FRC) in the UK is responsible for the endorsement and adoption of IFRS for use by UK companies. In general, listed companies, banks, and other financial institutions in the UK are required to prepare their financial statements in accordance with IFRS.
It’s worth noting that recent developments, including the UK’s exit from the European Union, have introduced some changes to the UK accounting landscape. The UK government has indicated its intention to review and potentially amend UK accounting standards to better suit the needs of UK companies post-Brexit.
In summary, UK GAAP (specifically FRS 102) is primarily used by small and medium-sized companies and unlisted entities, while IFRS is commonly adopted by listed companies and larger entities in the UK, subject to certain exemptions and reduced disclosure options.
