Key financial reporting updates – May 2024

The changes represent the largest revision of the standards since their launch in 2013 and serve to increase alignment of GAAP with International Financial Reporting Standards (IFRS).

This article explains the key changes, and the potential implications for entities reporting under Gibraltar Financial Reporting Standards.

Revenue from contracts with customers

Section 23 of FRS102, and the corresponding Section 18 of FRS105, have been updated to closely align them with the provisions in IFRS 15: Revenue from contracts with customers.

A five-step model is being introduced, with revenue recognition based on the identification of distinct goods and services, performance obligations on the part of the seller, and the consideration the seller will be entitled to on the completion of the contract.

Although the changes apply to both FRS102 and FRS105, additional simplifications have been included in FRS105 to assist micro-entities.

Leases

Section 20 of FRS102 has been updated to closely align it with the provisions in IFRS 16: Leases. The underlying aim of the standard is to remove off-balance sheet financing, and effectively remove the concept of operating leases for lessees.

All leases, other than short-term or low-value asset leases, will be recognised on balance sheet, with a Right-of-Use asset and a corresponding lease liability being presented.

Lessee accounting remains largely unchanged. The lease amendments have not been applied to FRS105, which retains the existing finance lease and operating lease models.  

Concepts and pervasive principles

Section 2 of both standards has been rewritten, to align with the IFRS Conceptual Framework. The sections have doubled in length, to closely align it with the equivalent international standard and provide additional guidance for GAAP preparers.

The “Fair Value” appendix of the existing Section 2 has been removed, and replaced with a new Section, 2A, aligning it with IFRS 13: Fair Value.

Small companies

In FRS102 section 1A, more clarity will be provided on which disclosures are expected to be necessary for financial statements to give a true and fair view, as required by law.

Other changes

Other incremental changes are noted in areas such as share-based payments, deferred tax and specialised activities, although these primarily relate to additional guidance being provided, rather than substantive changes in accounting treatment or disclosures.

What next?

The new standards come into effect for periods beginning on or after 1 January 2026, although early adoption is permitted. Comparatives will need to be restated, and provisions exist around transition to the new standards, with reliefs and exemptions available in certain areas.

Grant Thornton will be providing more detailed information on the significant changes in due course. In the meantime, for further information, and to find out how Grant Thornton can assist you in navigating these changes, please contact Neal Taylor, Partner.