The future of Irish GAAP
Preparing for change
Developing a replacement to existing Irish GAAP has long been an objective of the Financial Reporting Council. For periods beginning on or after 1 January 2015, three new Financial Reporting Standards (FRS 100, 101 and 102) come into force, bringing with them a number of new options for all Irish entities and groups. With all of the new standards now published, companies should start to think about the impact that these will have on their financial reporting.
New reporting standards
Irish companies generally prepare their financial statements on one of two bases: full IFRSs or existing Irish standards. But this is about to change. Current Irish accounting standards are to be replaced with FRS 102, a new, much shorter standard, based on the IFRS for SMEs. In addition, a new option for some companies to follow the recognition and measurement bases of IFRSs, but with reduced disclosures, has been introduced by FRS 101.
- FRS 100 “Application of Financial Reporting Requirements” sets out rules and guidance on how to select the appropriate accounting framework for a particular entity or group.
- FRS 101 “Reduced Disclosure Framework” introduces a new reduced disclosure framework enabling most subsidiaries and parents to use the recognition and measurement bases of IFRSs in their individual entity financial statements, while being exempt from a number of disclosures required by full IFRSs.
- FRS 102 “The Financial Reporting Standard Applicable in the UK and Republic of Ireland” is the ‘main’ standard which replaces current Irish GAAP. It also includes disclosure exemptions for certain qualifying entities.
- FRS 102 – the main replacement for current Irish GAAP – was published on 14th March 2013. The application of this new standard is expected to present a number of challenges for businesses, not only in terms of financial reporting but extending to tax, distributable reserves, staff training, systems and more.
- FRED 49/FRS 103 “Insurance Contracts” The Financial Reporting Council (FRC) has recently published the ED 49 on 29 July 2013 and proposed to be effective for accounting periods beginning on or after 1 January 2015. The ED was issued as a part of FRC’s initiative to bring consistency in financial reporting of the Irish Insurance Companies. FRED 49 is the exposure draft issued by FRC aimed at the accounting treatment and disclosure requirements of Insurance Contracts including financial guarantees in limited circumstances and financial instruments with discretionary participation features. It is aimed at Life and Non-life Irish Insurance and Reinsurance entities, including captives and insurance special purpose vehicles which have decided to apply FRS 102. There is no significant change in accounting treatment of insurance contracts introduced by FRED 49. Rather, FRED 49 aims at consolidation of the accounting requirements for insurance companies in Ireland which were previously contained separately in FRS 27 (for life insurance companies), various statutory instruments containing requirements for life and non-life companies and Statements of Recommended Practices (SORP) issued by the Association of British Insurers (ABI).
How we can help
The challenges will vary from business to business depending on industry, structure and size. Listed companies will want to take the opportunity to re-evaluate the choice of accounting framework used to prepare their individual parent and subsidiary financial statements. Unlisted groups and entities will need to decide whether to move up to full IFRSs or transition to the replacement for current Irish GAAP, FRS 102, taking into account the wider implications of the options on offer. Deloitte has produced further publications including ‘Choosing your GAAP’, which looks at the broader implications of changing accounting frameworks.
Our integrated team of accounting and taxation specialists can assist you in assessing and understanding the various impacts of these new standards. If you would like further, more detailed information or advice, or to discuss how these changes could affect your business, please contact your usual Deloitte partner or one of the contacts listed to the right on next steps.