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| Old GAAP | FRS 102 | Further Comment On Differences |
| Provisions and Contingencies | Provisions and Contingencies (S.21) | |
| A provision is recognised when: · an entity has a present obligation (legal or constructive) as a result of a past event; · it is probable that a transfer of economic benefits will be required to settle the obligation; and · a reliable estimate can be made of the amount of the obligation. | Same as old GAAP.
|
No differences. |
| Contingent liabilities are either: · possible obligations for which it has yet to be confirmed whether the entity has an obligation that could lead to a transfer of economic benefits; or · present obligations that do not meet the recognition criteria because either it is not probable that a transfer of economic benefits will be required to settle the obligation, or a sufficiently reliable estimate of the amount of the obligation cannot be made. | Same as old GAAP. | No differences. |
| A contingent liability is disclosed, unless the possibility of a transfer of economic benefits is remote. | Same as old GAAP. | No differences. |
| An entity does not recognise a contingent asset. However, where the realisation of the profit is virtually certain, the related asset is not a contingent asset, and it should be recognised. | Same as old GAAP. | No differences. |
| No provision allowed for future operating losses however where FRS 3 applied and a decision had been made to terminate an operation (i.e. the entity was committed to the sale or termination of the operation at the balance sheet date) then a provision could be created for future operating losses and netting against future profits up to the date of termination or sale. | No provision allowed for future operating losses regardless of whether a decision to terminate has been made. | Where a provision for termination/closure has been included on the date of transition or the comparative year of the first FRS 102 financial statements, these losses will have to be derecognised. This will include a deferred tax adjustment for a tax adjustment previously claimed which will not be allowed until the following year under FRS 102. See example attached illustrating the journals required on transition (Example 87 – Inclusion Of Future Operating Losses In A Provision For Termination Of Operations Under Old GAAP). |
| No such disclosures required. | Disclosures required: · detailing the expected amount of payments resulting from an obligation; · detailing the nature and business purpose of any financial guarantee contracts in scope of the standard regardless of any provision or contingent liability is to be disclosed (Section 21.17A). | These are disclosure requirements. The FRS 102 financial statements must reflect these additional disclosures. See attached example disclosures under Section 21 (Example 88 – Extract From Notes To The Financial Statements). |
| Disclosure required: · major assumptions concerning future events that may affect the amount required to settle an obligation; · a separate line item in the reconciliation of opening and closing balances detailing the movement as a result of discounting instead can be shown in the additions line (Section 21.14 (a) (ii)). | No such disclosures required. | These are disclosure requirements. An entity may if it wishes continue to disclose these. |
| For FRS 26 adopters, financial guarantees were required to be disclosed and these disclosures were also more onerous. | Financial guarantees only required to be disclosed. | Less onerous disclosures required, merely a disclosure detailing the fact that financial guarantees exist and where it is probable they are likely to be called in and the fact that a provision has been included. |
| Onerous contracts not dealt with by other standards were not required to be accounted for under FRS 12 other than onerous leases. | Onerous contracts not dealt with by other standards should be accounted for under this standard. | This difference may result in more provisions being required. However in reality this is likely to have limited effect. |
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