The FRS 101 reduced disclosure framework lets a qualifying UK or Irish group entity apply full IFRS recognition and measurement in its individual accounts while omitting a defined set of IFRS disclosures. The exemptions run across more than fifteen standards. Some drop entire standards — IAS 7 cash flow statements and IFRS 7 financial instruments disclosures — while others carve out specific paragraphs of IFRS 13, IFRS 15, IFRS 16, IAS 19, IAS 24 and several more. The trade for that relief is that shareholders must be given a chance to object, and for many exemptions the omitted information has to appear instead in the group’s publicly available consolidated accounts.
Who Can Use the Exemptions
A qualifying entity is one included in the consolidated financial statements of a parent that prepares publicly available consolidated accounts intended to give a true and fair view.1Financial Reporting Council. FRS 101 Reduced Disclosure Framework Subsidiaries are the obvious case, but the ultimate parent can also qualify for its own individual accounts if it meets the same test.
FRS 101 applies only to individual entity financial statements. An entity that prepares consolidated accounts, whether required to or voluntarily, cannot use FRS 101 for those consolidated accounts.
Two groups are shut out. Publicly accountable entities — those with traded debt or equity, or holding assets in a fiduciary capacity for a broad group of outsiders, such as listed banks and insurers — cannot use FRS 101. Charities are also excluded.
Conditions Attached to the Exemptions
Meeting the qualifying entity definition is only the starting point. Three further conditions apply.
Shareholders must be notified in writing of the intention to use the framework. Holders of five per cent or more of the allotted shares (or of the ownership interests, for entities without share capital) can serve written notice objecting, and if they do, the exemptions cannot be taken. That gives minority shareholders a direct veto.
Many of the exemptions depend on equivalent disclosures appearing in the consolidated accounts of the group in which the entity sits. The parent’s consolidated accounts must be publicly available and prepared under either UK-adopted IFRS or FRS 102. Where the exemption carries an equivalent-disclosure condition, the entity cannot take it unless the group accounts actually contain the corresponding information.
The individual accounts must include a note stating they have been prepared under FRS 101 and identifying which exemptions have been taken.1Financial Reporting Council. FRS 101 Reduced Disclosure Framework
Full Exemptions From Entire Standards
Two standards fall away almost entirely.
An FRS 101 entity does not need to prepare a statement of cash flows under IAS 7. In practice this is one of the largest time savings, because cash flow statements carry significant preparation and reconciliation work.
The entity can also omit the whole of the IFRS 7 disclosures on financial instruments, provided equivalent disclosures sit in the group’s consolidated accounts.2Financial Reporting Council. FRS 101 Reduced Disclosure Framework IFRS 7 covers the significance of financial instruments to the entity’s position, the nature and extent of risks, and risk management policies — pages of notes in a full IFRS filing.
Revenue, Leases and Fair Value
Under IFRS 15, the entity can omit the disaggregation of revenue, the information about performance obligations, and the reconciliation of contract balances. Revenue is still recognised under IFRS 15, but the detailed note disclosures on contract assets, remaining performance obligations, and significant judgements in determining transaction prices come out.2Financial Reporting Council. FRS 101 Reduced Disclosure Framework
Under IFRS 16, the maturity analysis of lease liabilities, certain variable lease payment details and other specified disclosures can be omitted. Lease liabilities must still be shown separately from other liabilities in the indebtedness disclosures required by the Companies Act regulations.
IFRS 13 paragraphs 91 to 99 — covering the fair value hierarchy, valuation techniques and sensitivity analyses — can be dropped, subject to equivalent disclosures appearing in the group accounts.
Employee Benefits and Share-Based Payments
IAS 19 defined benefit disclosures shrink significantly. The detailed actuarial assumptions, sensitivity analyses and reconciliations of plan assets and obligations that make pension notes some of the longest in full IFRS accounts can be skipped.
Under IFRS 2, the entity can omit the detail on number and weighted average exercise prices of share options, the fair value measurement methodology, and the effect on profit or loss. This exemption applies where the share-based payment concerns equity instruments of another group entity (for subsidiaries), or the entity’s own equity instruments where its individual accounts sit alongside the group’s consolidated accounts.2Financial Reporting Council. FRS 101 Reduced Disclosure Framework
Related Party Transactions
IAS 24 allows a qualifying entity to omit disclosure of transactions with other members of its group, provided any subsidiary party to those transactions is wholly owned by a group member. Transactions with joint ventures, associates, or entities where minority interests exist do not qualify for this relief. The exemption does not extend to transactions with key management personnel; director and senior executive compensation must still be disclosed.
Other Targeted Exemptions
The remaining reliefs are narrower but still meaningful:
- IFRS 3 Business Combinations: certain fair value information and goodwill reconciliations on acquisitions, where equivalent information appears in the group accounts.
- IFRS 5 Non-current Assets Held for Sale: certain disclosures about discontinued operations.
- IFRS 6 Exploration for Mineral Resources: operating and investing cash flows related to exploration activities.
- IAS 1 Presentation of Financial Statements: capital management disclosures, certain comparative information requirements, and other specified presentation paragraphs.
- IAS 8 Accounting Policies: information about IFRS standards issued but not yet effective, removing the “standards not yet adopted” note.
- IAS 16 Property, Plant and Equipment: certain comparative reconciliation information.
- IAS 36 Impairment of Assets: specified impairment testing disclosures, including certain value-in-use and fair-value-less-costs-of-disposal details.
- IAS 38 Intangible Assets, IAS 40 Investment Property, IAS 41 Agriculture: certain comparative period information under each standard.
Restrictions if the Entity Is a Financial Institution
A financial institution can be a qualifying entity, but two of the biggest exemptions are cut back.
The IFRS 7 exemption is not available at all. A qualifying financial institution must give the full suite of financial instrument disclosures.2Financial Reporting Council. FRS 101 Reduced Disclosure Framework
The IFRS 13 fair value exemption is available for assets and liabilities other than financial instruments, but not for financial instruments themselves. A qualifying bank subsidiary still provides fair value hierarchy and measurement information for its loan book and investment portfolio, even though a qualifying manufacturing subsidiary can omit those same disclosures.
What Still Has to Be Disclosed
Even with every available exemption taken, several disclosures remain.
The framework statement itself is mandatory: the accounts must confirm they were prepared under FRS 101 and list the specific exemptions taken.
Material accounting policy information must still be given. A policy is material if changing or omitting it could influence decisions users make based on the financial statements.3IFRS Foundation. IAS 1 – Presentation of Financial Statements Boilerplate descriptions that add nothing beyond the standard itself can come out.
Critical accounting judgements and sources of estimation uncertainty must be disclosed. No exemption covers these, because they are entity-specific and cannot be replicated at group level.
Key management personnel compensation and other related party transactions with directors and senior executives must be disclosed even where the broader IAS 24 group exemption applies. UK company law requires director remuneration disclosures independently of the accounting framework.
Keeping the Exemption List Current
The FRC reviews FRS 101 annually. Amendments from the 2024/25 cycle add disclosure exemptions from the new requirements of IFRS 18, which will replace IAS 1 as the standard governing presentation and disclosure.4Financial Reporting Council. FRC Concludes Annual Review of FRS 101 The FRC has also confirmed that IFRS 19, the IASB standard for subsidiaries without public accountability, cannot be applied alongside FRS 101; entities have to choose one framework or the other.
Because paragraph references shift as IFRS standards are amended or replaced, check the current version of FRS 101 on the FRC’s website at the start of each reporting cycle rather than working from a list that may have been overtaken.