FRS 101 or FRS 102 for a subsidiary

Q: How should a group decide?

Illustration only. A UK subsidiary of an IFRS group has acquired goodwill of 500 from a past trade and asset purchase, several property leases and trade receivables measured for the group on an expected credit loss basis. Under FRS 102 it would amortise the goodwill, compute deferred tax on a different basis and, unless it opts into IFRS 9, measure receivables impairment differently, so the group finance team would keep a standing set of consolidation adjustments. Under FRS 101 the subsidiary's own ledgers already match the group pack, and the main extra work is the company law formats and the goodwill override note. FRS 102 tends to suit subsidiaries whose transactions are simple, whose parent does not report under IFRS, or whose local finance team and auditor work only in UK GAAP. FRS 101 tends to suit subsidiaries of IFRS groups with leases, acquisitions or financial instruments where differences would otherwise need tracking. Section 407 of the Companies Act 2006 also expects the same framework across the group's UK subsidiaries unless the directors see good reasons otherwise, although FRS 101 and FRS 102 count as the same framework for that purpose; see consistent frameworks across a group.

For a UK subsidiary of a group that reports under IFRS, FRS 101 means the subsidiary uses the same recognition and measurement as the group, with company law tweaks and a long list of disclosure exemptions. FRS 102 means a separate set of UK measurement rules, which since 2026 sit much closer to IFRS on leases and revenue but still differ on goodwill, financial instrument impairment and deferred tax. There is no longer any requirement to notify shareholders before using either set of reduced disclosures.

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Who can choose between FRS 101 and FRS 102?

FRS 100 paragraph 4 sets the menu. Individual accounts not required by law to use IFRS must be prepared under FRS 105 (if eligible), FRS 102, adopted IFRS or, for the individual accounts of a qualifying entity, FRS 101. A qualifying entity is defined in both FRS 101 and FRS 102 as a member of a group whose parent prepares publicly available consolidated financial statements intended to give a true and fair view, where that member is included in the consolidation.

FRS 101 adds exclusions: charities cannot use it, nor can entities that apply Schedule 3 to the Regulations and have contracts within the scope of IFRS 17. FRS 101 paragraph 3 also says it cannot be used for consolidated financial statements, so an intermediate parent that prepares group accounts can only use it for its own individual accounts. FRS 102 reduced disclosures are similarly limited to individual accounts.

The group’s consolidated accounts do not have to be IFRS for FRS 101 to be available, but the measurement savings described below only arise when they are. For the full scope rules see FRS 101: the reduced disclosure framework.

How does measurement differ between the two?

Under FRS 101 paragraph 5(b) the subsidiary applies the recognition, measurement and disclosure requirements of adopted IFRS, amended only where necessary to comply with the Companies Act and the Regulations. Its numbers therefore start out on the same basis as the group reporting pack. Under FRS 102 the subsidiary applies a different standard, and the group then has to make consolidation adjustments for every difference, as explained in our guide to uniform accounting policies in groups.

The gap has narrowed. The Periodic Review 2024 amendments apply to FRS 102 for accounting periods beginning on or after 1 January 2026. They replaced Section 20 with an on balance sheet lessee model based on IFRS 16 (Basis for Conclusions B20.3) and replaced Section 23 with a five step revenue model based on IFRS 15 (B23.1). The FRC said in B20.6 that it made lease simplifications optional because groups with entities reporting under both frameworks wanted fewer mandatory differences, and B20.7 allows lease balances already calculated under IFRS 16 for group reporting to be used as opening balances.

Differences that remain for a typical trading subsidiary include:

Goodwill and intangibles. FRS 102 paragraph 19.23 requires goodwill to be amortised, with a maximum of 10 years where the life cannot be reliably estimated. Under FRS 101 the subsidiary follows IFRS 3 and does not amortise goodwill, which FRS 101 paragraph A2.8 explains is usually a true and fair override of Schedule 1 paragraph 22, requiring particulars, reasons and effect to be disclosed. See goodwill useful life and amortisation.
Financial instruments. FRS 102 paragraph 11.2 allows Sections 11 and 12, or IAS 39 or IFRS 9 recognition and measurement. A subsidiary using Sections 11 and 12 measures receivables impairment differently from an IFRS 9 group; see IFRS 9 vs FRS 102 impairment.
Deferred tax. FRS 102 uses a timing differences plus approach rather than the IAS 12 temporary difference approach; see IAS 12 vs FRS 102 deferred tax.
Policy choices. FRS 102 permits expensing development costs (18.8H) and borrowing costs (25.2) where IFRS requires capitalisation.

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Which disclosures does each framework let a subsidiary leave out?

FRS 101 paragraph 8 lists exemptions from IFRS disclosures, including the cash flow statement under IAS 7, IFRS 7 financial instrument disclosures, the IFRS 13 fair value hierarchy disclosures, much of IFRS 15 and IFRS 16, IAS 24 key management compensation (paragraph 17), intragroup related party transactions where the subsidiary party is wholly owned, and capital management disclosures. Several are conditional on equivalent disclosures appearing in the consolidated accounts. Financial institutions lose the IFRS 7, IFRS 13 (for financial instruments) and capital management exemptions under paragraph 7.

FRS 102 paragraph 1.12 offers a shorter list: the cash flow statement, many Section 11 and 12 disclosures, some Section 23 revenue disclosures, share based payment detail, certain Pillar Two tax disclosures and key management personnel compensation under paragraph 33.7. Our guide to reduced disclosures for qualifying entities sets them out.

In practice the disclosure saving under FRS 101 is larger relative to full IFRS, but the starting point under FRS 102 is already lighter, so the finished notes can end up a similar length. Company law disclosures still apply under both, because both produce Companies Act accounts that must comply with the Act and the Regulations (FRS 101 paragraph 4A makes this explicit, and its footnotes warn that company law still requires certain financial instrument and fair value disclosures).

Do shareholders still have to be notified?

No. Both standards originally required a qualifying entity to notify its shareholders in writing about the use of disclosure exemptions and gave certain shareholders the right to object. In December 2016 the FRC deleted that condition: FRS 101 paragraph 13 and FRS 102 paragraph 1.17 record that the requirement was removed for accounting periods beginning on or after 1 January 2016.

The FRC’s reasons in FRS 102 Basis for Conclusions B1.4 and B1.5 were that compliance was no longer cost effective, that a controlling shareholder can direct its subsidiary’s reporting anyway, and that company law does not generally give shareholders a right to object to disclosure exemptions. Groups sometimes still minute the decision at board level, and minority shareholders keep their wider company law rights, but there is no notification step in either standard today.

What remains are note disclosures. FRS 101 paragraph 5(c) and FRS 102 paragraph 1.11(c) require a brief narrative summary of the exemptions taken and the name of the parent in whose consolidated accounts the entity is included, with where those accounts can be obtained. FRS 101 paragraph 10 also requires the statement that the accounts were prepared in accordance with FRS 101 and prohibits an unreserved statement of IFRS compliance.

What does moving between them involve?

Both FRS 101 and FRS 102 accounts are Companies Act individual accounts under section 395(1)(a) of the Companies Act 2006, as FRS 100 footnote 5 confirms. A switch between them is therefore not a change from Companies Act to IAS accounts, and the five year restriction in section 395(4A) on moving from IAS accounts back to Companies Act accounts does not come into it. That restriction does apply to a subsidiary currently preparing full IFRS individual accounts that wants to move to either standard.

FRS 100 paragraph 11(b) says a qualifying entity moving to FRS 101 applies paragraphs 6 to 33 of IFRS 1, but without an opening statement of financial position at the transition date. Paragraph 11(c) says an entity moving to FRS 102 applies the transition rules in FRS 102 Section 35. A subsidiary already preparing full IFRS accounts that moves to FRS 101 does not reapply IFRS 1 (FRS 100 paragraph 12), but must consider the company law amendments and give reconciliations if they have a material effect.

How should a group decide?

Illustration only. A UK subsidiary of an IFRS group has acquired goodwill of 500 from a past trade and asset purchase, several property leases and trade receivables measured for the group on an expected credit loss basis. Under FRS 102 it would amortise the goodwill, compute deferred tax on a different basis and, unless it opts into IFRS 9, measure receivables impairment differently, so the group finance team would keep a standing set of consolidation adjustments. Under FRS 101 the subsidiary’s own ledgers already match the group pack, and the main extra work is the company law formats and the goodwill override note.

FRS 102 tends to suit subsidiaries whose transactions are simple, whose parent does not report under IFRS, or whose local finance team and auditor work only in UK GAAP. FRS 101 tends to suit subsidiaries of IFRS groups with leases, acquisitions or financial instruments where differences would otherwise need tracking. Section 407 of the Companies Act 2006 also expects the same framework across the group’s UK subsidiaries unless the directors see good reasons otherwise, although FRS 101 and FRS 102 count as the same framework for that purpose; see consistent frameworks across a group.

What mistakes come up most often?

Still sending shareholder notification letters as a legal requirement. The condition was deleted from both standards with effect from 2016.
Claiming exemptions without checking the group accounts. Several FRS 101 and FRS 102 exemptions depend on equivalent disclosures in the consolidated accounts.
Omitting the goodwill override note under FRS 101. FRS 101 paragraph A2.8 expects particulars, reasons and effect of not amortising goodwill.
Assuming FRS 102 now equals IFRS. Leases and revenue moved closer in 2026, but goodwill, impairment and deferred tax did not.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.