UK-GAAP

KEY DIFFERENCES IN IFRS AND UK GAAP FRS 102 9. Investment Property

• FRS 102: Allows the cost model if fair value can't be reliably measured.
1. Concepts and Principles • IFRS (IAS 40): Permits either the cost model or the fair value model.
• FRS 102: Recognizes two measurement bases: historical cost and fair value.
• IFRS: Recognizes historical cost and current value as measurement bases. 10. Impairment of Assets
• FRS 102: Requires impairment reviews only if there are indications of impairment.
2. Financial Statement Presentation • IFRS (IAS 36): Mandates annual impairment reviews for certain assets.
• True and Fair Override (FRS 102): Allows directors to deviate from FRS 102 if necessary to provide a
true and fair view, with full disclosure of the departure. 11. Leases
• IFRS: Does not explicitly provide a "true and fair override" but emphasizes fair presentation. • FRS 102: Distinguishes between finance and operating leases for lessees.
• IFRS (IFRS 16): Requires all leases to be recognized on the balance sheet, except for short-term
3. Statement of Financial Position or low-value leases.
• FRS 102: Format dictated by the UK Companies Act, focusing on the equation: Assets - Liabilities =
Equity. 12. Financial Instruments
• IFRS: Follows a similar structure but with international standards in presentation. • FRS 102: Adopts a simplified approach to financial instruments measurement and impairment.
Financial assets not measured at FVTOCI.
4. Income Statement • IFRS (IFRS 9): Uses a more detailed expected loss model for impairments and fair value measurement.
• FRS 102: Requires discontinued operations to be shown line-by-line. Financial assets can be measured at FVTPL, FVTOCI & Amortized cost.
• IFRS (IFRS 5): Allows a single figure for discontinued operations on the face of the statement.
13. Revenue Recognition
5. Statement of Cash Flows • FRS 102: Divides revenue recognition into categories based on goods, services, and construction
• FRS 102: Exemptions for small entities and certain funds from producing a statement of cash flows. contracts. Revenue is recognized based on the transfer of significant risks and rewards, stage of
• IFRS (IAS 7): Requires all entities to present a statement of cash flows. completion, or specific criteria met.
• IFRS (IFRS 15): Adopts a comprehensive five-step model for revenue recognition. This model focuses
6. Inventories on the transfer of control rather than risks and rewards.
• FRS 102: Offers detailed guidance on production overheads and permits reversal of inventory
impairments. 14. Provisions and Contingencies
• IFRS (IAS 2): Less guidance on overheads and does not allow for reversal of inventory impairments. • FRS 102: Simplified approach to restructuring provisions.
• IFRS (IAS 37): Provides detailed guidance on recognizing and measuring provisions.
7. Intangible Assets
• RS 102: Makes capitalization of development costs optional and limits the useful economic life 15. Share-based Payment
estimate. • FRS 102: Simplifies the recognition and measurement rules for share-based payments.
• IFRS (IAS 38): Requires capitalization if criteria are met and allows for an indefinite useful life if • IFRS (IFRS 2): Provides detailed requirements for share-based payment transactions.
justified.
16. Government Grants
8. Borrowing Costs • FRS 102: Allows recognition based on the performance model or the accruals model.
• FRS 102: May adopt capitalization of borrowing costs. • IFRS (IAS 20): Uses an accruals model for government grant recognition.
• IFRS (IAS 23): Requires capitalization of borrowing costs related to qualifying assets.
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17. Joint Ventures
• FRS 102: Classifies joint ventures based on control and operation.
• IFRS (IFRS 11): Distinguishes between joint operations and joint ventures based on rights to assets and obligations.

18. Business Combinations

IFRS
1. Transaction costs incurred by the parent entity while buying subsidiary are expensed.
2. NCI can be measured using FV or proportionate of NA method.
3. While step acquisition, initial measurement is re-measured to fair value.
4. Goodwill is not amortized but subject to annual impairment review.
5. Bargain purchase that is negative goodwill is recognized in PL immediately.
6. Contingent consideration payable for acquisition is measured at FV.

UK GAAP
1. Transaction costs incurred by the parent entity while buying subsidiary are capitalized as part of investment.
2. Only proportionate of net asset method can be used.
3. There is no requirement to remeasure the initial investment.
4. Goodwill is amortized over the expected useful life of the goodwill.
5. Bargain purchase initially recognized in Balance and later in PL when the asset due to which negative goodwill arose is recovered.
6. Contingent consideration is only recognized if it is probable.

19. Deferred Taxation

• FRS 102: Arises due to timing differences i.e. difference in Taxable profits & PBT.
• IFRS (IAS 12): Arises due to temporary differences i.e difference Carrying Value and Tax based

20. Forex
• FRS 102: No reclassification of gain or loss from Equity to PL in case of disposal of foreign subsidiary.
• IFRS (IAS 21): Reclassification of gain or loss from Equity to PL takes place in case of disposal of foreign subsidiary.

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