Financial Reporting Exposure Draft 82

In this blog, Stephanie Compston looks at FRED (Financial Reporting Exposure Draft) 82 which was published by the Financial Reporting Council just before Christmas. 

The FRED sets out the proposed changes to FRS102, the accounting standard that underpins the Charity SORP. It is subject to a public consultation which closes on 30 April 2023 and so the proposals may yet be amended.  The Charity SORP-making body, advised by the Charity SORP Committee, have yet to issue any guidance on how they propose to interpret the planned changes but it’s already clear that there will be significant changes for some charities.

The most significant changes relate to the way that income from contracts (revenue) and leases are accounted for.  The FRED incorporates the provisions of two International Financial Reporting Standards which have been mandatory for large non-charitable entities for a while now.


Under the FRED, a charity will account for any leases that are not short-term or low value, as both an asset and a liability on its balance sheet.  Previously most leases (operating leases) were accounted for by simply recognising the rental payments as an expense when they were due.

Short-term leases are those which, at commencement, have a term of 12 months or less.  Low-value leases are not determined by reference to materiality to the reporting entity.  They would include leases for items such as tablet computers, PC’s, desk and mobile telephones, televisions and small power tools but not leases for cars, vans and lorries, cranes and plant, boats and ships, aircraft and land and buildings.

This change will have a significant impact for charities with a number of leased assets such as premises/charity shops.

It is proposed that this change would not be applied retrospectively.


The FRED proposes that FRS102 adopts the five-step revenue recognition model set out in IFRS15 in respect of contract income.  For charities, non-exchange income (donations, legacies and some grants) would continue to be accounted for under the Public Benefit Entity rules in section 34 of the FRS.  Section 34 has been updated but the FRC state that it is ‘not intended to alter practice’.

Other changes in the FRED are intended to make existing requirements clearer or are less significant and will affect fewer charities:

The definition of ‘Fair Value’ has been bought in line with IFRS13 and additional guidance has been included. There are minor changes to the disclosures required about going concern.  Most of the other changes will mainly affect commercial entities.

The FRC is proposing that the amended FRS102 will apply to accounting periods commencing on or after 1 January 2025, which means 31 December 2025 year ends onwards (unless you have a shortened accounting period) but this is also subject to consultation.

This subject will develop over the course of 2023 and things should become much clearer as time goes on. 

This blog is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not be used as a substitute for taking professional advice in any specific situation. Wbg Services LLP (and its subsidiary Wbg (Audit) Limited) will accept no responsibility for any actions taken or not taken on the basis of this blog. If you would like further advice or would like to discuss any of the issues raised in the blog then please get in touch with your regular Wbg contact or use the contact form on our website.

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