In 2017 the Financial Reporting Council published their first Triennial Review of FRS 102, the financial reporting standard which replaced old UK GAAP in 2015. This first significant review of the standard takes effect for accounting periods beginning on or after 1 January 2019, resulting in the following changes.

Overriding principle – ‘basic’ debt instrument

Debt instruments are currently classified as either ‘basic’ or ‘non-basic’ based upon criteria set out in Section 11 Basic Financial Instruments. In general, basic instruments are accounted for as amortised cost, with non-basic instruments accounted for as fair value through profit and loss. The impact of the overriding principle has been to allow instruments which give rise to cash flows on specific dates that relate to the repayment of principle and compensation in line with the time value of money and other lending risks, to be considered basic instruments even if some of the criteria in Section 11 are not met. 

Removal of undue cost or effort exemption – investment properties

The exemption for recognising investment properties at fair value where this results in undue cost or effort has been removed. As such all investment properties must now be measured at fair value. This does not need to be an external valuation, instead the directors could value the property themselves although they would need to disclose in the financial statements the assumptions and method used.

There has however been a new accounting policy choice introduced where investment property rented out to another group company can be measured at cost less depreciation and impairment, rather than fair value. Where this has previously been measured at fair value, this can be used as deemed cost.

Directors loans to small entities

Previously where directors made a loan to a small entity this was required to be measured at the discounted present value of future payments, with the difference recorded as a capital contribution. This was seen as a cumbersome calculation to many and has been changed so that loans can now be measured at the transaction price.

Intangible assets acquired in a business combination

Section 18 of FRS 102 required various intangible assets acquired in a business combination to be recognised separately from goodwill. This was proving difficult in practice, and now these are only required to be recognised separately if they meet the recognition criteria for an intangible asset generally, are separable and arise from legal or contractual rights.


By Senior Manager, Adam Croney

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