The reduced disclosure framework (FRS 101) allows groups reporting under International Financial Reporting Standards (IFRS) to have their subsidiaries report using the same recognition and measurement principles, but without the effort involved in complying with exhaustive IFRS disclosure requirements.
The reduced disclosure framework (RDF) option is equally useful for groups reporting under US GAAP.
At present, many groups have their subsidiaries report under UK GAAP to minimise the reporting costs involved with full IFRS compliance, even though this results in additional effort to adjust their statutory financial statements for group reporting purposes. Large organisations may also benefit from the use of shared service centres.
Iain Selfridge discusses some of the things to consider before deciding FRS 101, The Reduced Disclosure Framework (FRS 101) is right for you.
FRS 101 introduces various disclosure exemptions. This means less onerous data requirements and reduced complexity compared to the requirements of full IFRS. Key disclosure exemptions include: cash flow statement, financial instruments (less relevant for financial institutions and entities with certain financial instruments held at fair value), business combinations, share-based payments, certain comparative information, certain related-party disclosures, key management compensation, impairments etc.
Entities that are not a financial institution (as defined in FRS 101) or that do not have certain financial instruments carried at fair value, are unlikely to incur significant impact from generating the disclosure information required under the RDF. As such, the transition is unlikely to result in major systems and process upgrades.
Financial institutions and entities with certain financial instruments held at fair value may find they are not impacted significantly, provided the parent entity is capable of generating any required new information centrally.