PLANS TO SCRAP half-yearly financial reports and preliminary announcements in favour of new requirements based on international rules around interim reporting have been announced by reporting watchdog the FRC.
The proposals, issued in an exposure draft, are relevant for entities that apply UK and Irish GAAP and prepare interim financial reports and aim to promote the publication of informative and understandable interim financial reports.
“The publication of reliable interim financial reporting improves the ability of investors, creditors or others to understand an entity’s capacity to generate earnings and cash flows and its financial position and liquidity,” said Roger Marshall, FRC board member and chairman of the Accounting Council.
“Draft FRS 104 is based on IAS 34 ‘Interim Financial Reporting’. Using an IFRS-based solution is consistent with the approach adopted for developing new UK and Irish GAAP.”
Under the plans, the FRC will revise its existing guidance on interim financial reports for consistency with new UK and Irish GAAP, or FRS 102. When the standard was issued, the FRC decided that FRS 102 should exclude interim reporting requirements and that existing reporting guidance contained in the statement half-yearly reports should be reviewed.
The Accounting Standards Board updated the statement in July 2007 for the implantation of the EU Transparency Directive in the UK and Republic of Ireland, which resulted in the introduction of the Disclosure and Transparency Rules (DTRs).
“Issuers continue to have the same reporting regulations under the DTRs in relation to half-yearly financial reports, but updating the ASB Statement Half-yearly reports is necessary because of the revisions to the annual financial reporting requirements,” the exposure draft said.
At the same time, the FRC is also proposing to withdraw the reporting statement ‘preliminary announcements’. When the preliminary announcement statement was published in 1998, stock exchange listing required issuers to make a preliminary statement of their annual results, which has been voluntary since 2007.
FRS 104 does not impose an obligation to produce interim reports, but companies that make a statement of compliance with the draft standard are required to apply all provisions of of draft FRS 104.
The interim reporting requirements are proposed to come into effect for interim periods commencing on or after 1 January 2015 and the statement of half yearly reporting will be withdrawn on the same date,
Comments on the proposals are invited by 12 January 2015. The FRC intends to finalise the new interim reporting requirements by the end of the first quarter of 2015.
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