The Financial Reporting Council (FRC) has issued a financial reporting exposure draft covering the treatment of residential management transactions in the financial statements of residential management companies.

FRED 50 Draft FRC Abstract 1, Residential Management Companies' Financial Statements sets out how residential management companies should recognise transactions with third party suppliers in their financial statements when discharging their duties to manage and arrange maintenance of a property.

The FRED reflects that residential management companies act as principals (not agents) in such transactions, a point which has been clarified following legal advice taken by the FRC and ICAEW. It also outlines consequential amendments to the Financial Reporting Standard for Smaller Entities (FRSSE).

In line with the implementation of the new UK GAAP standard FRS 102, the proposed effective date of draft FRC Abstract 1 and the consequential amendments to the FRSSE is applicable for accounting periods beginning on or after 1 January 2015 with early adoption permitted.

It will replace the Urgent Issues Task Force (UITF) Draft Abstract 49 Residential Management Companies' Financial Statements, which was issued by the FRC in May 2012, and is now withdrawn.

The deadline for comments is 11 November 2013.

The Exposure Draft documents are available from the FRC.