To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).
Day 50 (16 Apr)
If you were heading down the M1 this morning and were delayed because the motorway was shut for a time at J13, then I'd like to apologise - it was me. On my way to deliver a course for a north London firm, I found myself caught up in a four-car collision from which my car has emerged very battered. Crucially however, neither I nor the other three drivers was injured. We cover many miles for Mercia and are constantly reminded of the peril that entails whenever we witness a crash (as well as curse the hapless driver for delaying us!), but today's experience left me very grateful that things didn't end much worse.
Anyway, here we are fifty days on from the start of this little adventure, and we're into accounting for associates (section 14).
Let's jump in at para 14.4 which is entitled 'measurement - accounting policy election' (did someone mention election? Surely not!).
If you're not a parent entity (i.e. you have no subsidiaries), then you can choose one of four options to value the investment in your balance sheet:
- The cost model
- [not used]
- Fair value (changes in other comprehensive income) model
- Fair value (changes through the P&L) model
Why did I say 'four options' if option (b) is clearly not used? In fact, why have a reference there at all?! Why not have three options, you may ask.
Wherever you see a [not used] paragraph, this means that there is a missing paragraph that is present within the IFRS for Small and Medium Entities (on which FRS 102 is based) that was deliberately removed in the UK standard. In this case, option (b) in IFRSSME is the equity method, as if you were preparing consolidated accounts, even though you're not a parent and thus aren't preparing such accounts. This was removed (see Appendix 2 of FRS 102 on p318 of the Aug 14 version) because this is not a legally-compliant option in the UK.
Except that it is (now). Last week company law was amended (with effect for periods commencing on/after 1 January 2016) to, inter alia, permit this method. So, since FRED 59 has been drafted to amend FRS 102 in light of the regulatory changes, you might think that they would have replaced this paragraph. But they haven't - at least, not so far, and it's not clear whether this is on the agenda. We'll keep watching this space for more details...
P.S. If you missed the last instalment click here