This technical round-up includes developments up to 31 March 2024

Changes to UK company law

First Economic Crime and Corporate Transparency Act changes come into force

The first changes to UK company law introduced by the Economic Crime and Corporate Transparency Act came into effect on 4 March 2024.

As part of changes to the confirmation statement, all companies are now required to provide a registered email address that Companies House can use to communicate with them. Additionally, all companies will need to confirm that the intended future activities of the company will be lawful. Companies are also now required to register an ‘appropriate address’ as their registered office with Companies House, which cannot be a PO Box. 

Additional powers for the Registrar of Companies have been introduced. These changes are intended to improve the quality of data held by Companies House, for example by allowing the registrar to query and challenge information that appears to be incorrect. Stronger checks on company names have been introduced, as have new sanctions if a company does not respond to a formal request from Companies House for more information.

Further changes outlined in the Act, including ID verification checks and changes to accounts preparation and filing requirements, will take effect in due course. 

Company size thresholds

The UK government has announced plans to increase the monetary thresholds that determine company size by 50%, with an intended effective date of accounting periods beginning on or after 1 October 2024. The plans form part of a package of measures designed to reduce regulation on small and medium-sized companies with particular regard to non-financial reporting.

Our article, It’s time to raise the threshold, explores the government’s plans, and their possible implications for UK companies, in more depth.

UK GAAP

Amendments to FRS 102 and other FRSs

The Financial Reporting Council (FRC) has issued the finalised amendments to UK GAAP following its second periodic review of the suite of reporting standards. The headline amendments are the introduction of a single, comprehensive five-step model for revenue recognition into both FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime plus a requirement for lessees applying FRS 102 to recognise all leases on the balance sheet (subject to limited exemptions relating to short-term and low value leases). FRS 105 does not adopt this new model for lease accounting and maintains the distinction between operating and finance leases.

With the exception of amendments relating to new disclosure requirements about supplier finance arrangements (effective 1 January 2025), the amendments are effective for accounting periods beginning on or after 1 January 2026.

International Accounting Standards

Business Combinations – Disclosures, Goodwill and Impairment

In March 2024 the International Accounting Standards Board (IASB) published for public comment proposals aimed at enhancing the information companies provide to investors about acquisitions. The Exposure Draft Business Combinations – Disclosures, Goodwill and Impairment contains proposed amendments to IFRS 3 Business Combinations and IAS 36 Impairment of Assets.

Under the proposals, new disclosure requirements in IFRS 3 would result in companies reporting information about synergies expected to arise from a business combination and the performance of business combinations. The proposed amendments to IAS 36 are targeted amendments relating to the impairment test and the disclosure requirements.

Alongside the Exposure Draft, the IASB has released an introductory video and a snapshot.

The consultation is open for comment until 15 July 2024.

Primary Financial Statements

The International Accounting Standards Board (IASB) has released a webcast introducing the forthcoming IFRS Accounting Standard IFRS 18 Presentation and Disclosure in Financial Statements. IFRS 18 will set out the overall requirements for presentation and disclosures in the financial statements and will replace IAS 1Presentation of Financial Statements.

The new IFRS Accounting Standard will affect all IFRS preparers and investors and is due to be published on 9 April. IFRS 18 will have an effective date of 1 January 2027 with early application permitted.

Subsidiaries without Public Accountability

A series of webcasts explaining the forthcoming IFRS Accounting Standard for Subsidiaries without Public Accountability has been published. The standard is intended to simplify the preparation of subsidiaries’ financial statements by permitting eligible subsidiaries to apply IFRS Accounting Standards with reduced disclosure requirements. Additionally, the standard will enable an eligible subsidiary to apply group accounting policies in preparing its local financial statements.

The new IFRS Accounting Standard is expected to be issued in May 2024 with an effective date of 1 January 2027. Early application will be permitted.

IFRS Interpretations Committee

The IFRS Interpretations Committee’s agenda decision on accounting for a merger between a parent and its subsidiary in the parent entity’s separate financial statements was published as an addendum to the November 2023 IFRIC Update. The committee decided not to add a standard-setting project to the IASB’s work plan as the evidence it gathered indicated little, if any, diversity in practice.

The Committee concluded its discussions on two agenda decisions at its March 2024 meeting. The first relates to whether and, if relevant, when to recognise a provision for climate-related commitments applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The second relates to payments contingent on continued employment during handover periods applying IFRS 3 Business Combinations. In both cases, the Committee decided not to add a standard-setting project to the IASB’s work plan. The IASB will consider both agenda decisions at its April 2024 meeting.

Consultation on a tentative agenda decision on the disclosure of revenues and expenses applying IFRS 8 Operating Segments closed on 5 February 2024. The Committee tentatively decided that a standard-setting project would not be required. Feedback from the consultation will be considered at a future meeting.

Sustainability reporting

ISSB educational material published to support implementation

The International Sustainability Standards Board (ISSB) has published a range of materials to support implementation of the IFRS Sustainability Disclosure Standards. A webcast and educational material are available to help companies using the Sustainability Accounting Standards Board (SASB) Standards to meet the requirements in IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. The webcast offers first-hand perspectives from global investors on the importance of industry-based disclosures, while the educational material details how companies can refer to and consider the content in the SASB Standards to meet the requirements in IFRS S1.

To support preparers who have previous experience of reporting in line with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD), the ISSB has published a comparison of the requirements of IFRS S2 Climate-related Disclosures with the TCFD recommendations. The requirements of IFRS S2 integrate and build on the TCFD recommendations. For example, IFRS S2 might require more detailed information than the TCFD recommendations, or might use different wording. The ISSB’s comparison summarises some differences between the core content requirements in IFRS S2, including associated application guidance, and the TCFD’s core recommendations.

Three examples have been published to provide guidance on whether and, if so, how entities should consider ‘nature and social aspects’ of climate-related risks and opportunities when they apply the requirements in IFRS S2 to prepare climate-related disclosures. The examples illustrate how preparers might apply the requirements of IFRS S2 in certain circumstances, such as operating in different regions where natural resources might be more or less scarce.

Other educational materials include a joint publication from the Global Reporting Initiative and the IFRS Foundation that summarises interoperability considerations for measuring and disclosing greenhouse gas emissions, and a table mapping IFRS S1 and IFRS S2 core content disclosure requirements to the Integrated Reporting Framework content elements.