Fund Accounting Updates 2018


Fund Accounting Updates 2018

Companies Act and FRS 102 Triennial review

Companies Acts

How changes to the Companies Act impact Investment Funds?

SI 360 focuses on enhancing the disclosure of non-financial and diversity information by certain large undertakings and groups and is applicable for financial years commencing on or after 1 August 2017. The disclosure of non-financial information does not impact investment funds unless the following criteria are met:

(i) qualifies as a large company under section 280H of the Companies Act 2014 (No. 38 of 2014);
(ii) has an average number of employees which exceeds 500, and
(iii) is an ineligible entity.

Generally investment funds will not meet this criteria as they have no employees.

The disclosure of a diversity report in a company’s corporate governance statement is required for large traded companies e.g. exchange traded funds (“ETFs”). This shall not apply to a large traded company which has only issued securities, other than shares, admitted to trading on a regulated market, unless such company has issued shares which are traded in a multilateral trading facility.

A diversity report shall include: 

  • a description of the diversity policy applied in relation to the company’s board of directors with regard to aspects such as age, gender or educational and professional backgrounds;
  • the objective of that diversity policy,
  • how that diversity policy has been implemented by the company, and
  • the results of that policy in the financial year.

Where no diversity policy in place the directors shall include in its corporate governance statement an explanation as to why there is no policy.

FRS 102 Triennial review

What are the key changes coming out of the FRC triennial review of FRS 102?

The Financial Reporting Council (FRC) has published incremental improvements and clarifications to FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’. The amendments have arisen as a result of the first triennial review of FRS 102 and after taking into account stakeholder feedback on the implementation of FRS 102 and recent developments in financial reporting.

The principal amendments aim to balance improvements in the quality of financial reporting with maintaining stability and should make compliance with FRS 102 easier and more cost‑effective, with no loss of significant information. The principal amendments impacting investment funds are:

  • Introducing an overriding principle to the definition of a ‘basic’ debt instrument.
  • Introduction of net debt reconciliation in the Statement of Cash Flows. 
  • Simplifying the definition of a financial institution to remove references to ‘generate wealth’ and ‘manage risk’.
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