The institute’s comments are contained in its response to the regulator’s annual review of FRS 101,  the standard which  allows qualifying entities to exclude from their individual financial statements certain disclosures otherwise required by IFRS

Under FRS 101, those planning to apply its reduced disclosure framework are required to notify shareholders in writing, and those shareholders must not have objected, something which ICAEW describes as ‘an important safeguard’.

However, the ICAEW criticises the current guidance, saying that there is too much uncertainty around when, how and how often companies need to tell their shareholders about plans to apply the framework.

Dr Nigel Sleigh-Johnson, head of financial reporting faculty at ICAEW said: ‘Our outreach to members over FRS 101 has identified a worrying degree of confusion about how and when companies need to notify shareholders of plans to use FRS 101.

'Questions include whether the notification is required once, or every year, or in the second and subsequent years only when there is a change in shareholders?’

ICAEW is also raising the question of whether the same requirements should apply to both parent and subsidiary undertakings. The rationale for the latter notifying shareholders is to protect any minority interests where there are plans to provide reduced information in the subsidiary’s financial statements. The institute claims that whether the same reasoning can, or should, be applied to the parent company is debatable, given that its shareholders will have access to the consolidated group accounts.

Sleigh-Johnson said: ‘We think that these questions and uncertainties should be considered by the FRC – perhaps as part of the planned 2016/17 review of FRS 101. There may be a case for the FRC developing some sort of commentary or guidance for companies in this area.’

For details on the consultation on the FRC’s 2015/16 review of FRS 101 closed on 31 March click here