Accounting for intragroup loans, distributable profits and dividends is still a grey area under new FRS 102 accounting rules. Sarah Perrin ACA talks to accounting experts about current practice and the timeline for the release of the long-awaited ICAEW/ICAS guidance note to clarify reporting requirements
Many companies converting to new UK GAAP have struggled with the new accounting for off-market intragroup loans. Understanding the impact on their distributable profits poses another technical challenge. In the last 12 months, many UK companies have adopted the new standard, FRS 102 for the first time.
‘I have asked people what are the biggest challenges they have faced,’ says PwC partner Peter Hogarth, who leads the firm’s accounting consulting services. ‘Two connected issues top the list: how to determine the interest rate to apply to an off-market intragroup loan and how to determine the interest rate to apply to an off-market loan to or from a director.’
The issue has become such a concern for accountants that some would like the Financial Reporting Council (FRC) to offer some kind of relief when it completes its post-implementation review of FRS 102.
