RegulationAccounting StandardsFRS 26 ‘should take precedence’ in standards mix-up

FRS 26 'should take precedence' in standards mix-up

UITF makes recommendation to UK standards board in confusion over similar standards, FRS 26 should take precedence over FRS 3

The Urgent Issues Task Force has recommended that the
Accounting
Standards Board
clarify where companies should address confusion over two
standards, FRS 3 and FRS 26.

UITF member, Andy Simmonds said this was done in an
effort to help companies whose year ends fell on December 31.

‘Essentially, what you have is two different standards which tell companies
to put gains and losses, for example, in different places. FRS 26 specifies the
treatment of gains and losses on revaluation and derecognition of financial
instruments.

‘FRS 3 specifies the treatment of such gains or losses for all assets and
liabilities. It has been suggested that there is a conflict. For example,
unrealised gains and losses on Available for Sale financial assets of insurance
entities within the scope of FRS 26 are required to be recognised in the
statement of total recognised gains and losses and recycled through the profit
and loss account on realisation.

‘FRS 3, on the other hand, requires that these be included as part of the
investment return in the profit and loss account,’ said Simmonds.

The UITF has decided to recommend to the ASB a limited amendment to FRS 3
‘Reporting Financial Performance’ which, if implemented, will be applicable to
UK entities within the scope of FRS 26 ‘Financial Instruments: Recognition and
Measurement’.

‘We think that FRS 26 should take precedence,’ said Simmonds.

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