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FRS102 Update re Directors Loans

8 May 2017

The Financial Reporting Council have announced optional relief for small entities applying FRS102.

FRS102 is amended by inserting the following text :

1.15A   A small entity, as an exception to paragraph 11.13, may measure a basic financial liability that is a loan from a director who is a natural person and a shareholder in the small entity (or a close member of the family of that person) initially at transaction price.  Subsequently, for the same financial liability, a small entity is also exempt from the final sentence of paragraph 11.14(a).

This amendment is effective immediately with retrospective application available.

A consultation document (FRED67) is due for finalisation later in the year and at that time this interim relief will be replaced by the permanent proposals arising from the FRED67 consultation process.

Under FRS102 as previously issued a Directors Loan could only be measured at original value (transation price) where the loan was repayable on demand. This amendment means that there will be no need to apply notional interest rates and convert the carrying value to fair value where the company is a small entity where the loan is not repayable on demand (and therefore included in long term creditors).



The extension to 14th November 2017 also applies for capital acquisitions tax (gift tax, inheritance tax) for beneficiaries who have a valuation date in the year ended 31 August 2017 and also file and pay via ROS.

For PAYE taxpayers who are required by Revenue to file a Form 12 and opt to use the 'e'  version then filing is also extended to 14 November 2017.

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