FRC comments on issues arising in relation to accounting for social housing loans
Further to our most recent white paper sent out earlier this week, the Financial Reporting Council have issued a statement clarifying the accounting treatment of fixed rate bank loans with two-way break clauses.
The FRC is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment
The FRC have acknowledged that there is some diversity in views on the whether the loans are classified as ‘basic’ or ‘non-basic’ and as such may require a revision of the requirements under FRS102 in the future. In the meantime, Finance Directors have a choice to make as to their view of the loans as basic or non-basic. We believe most audit firms will now accept a ‘basic’ classification for these instruments, provided that information on the judgements that management has made in the process of determining the accounting method is disclosed within the financial statements (refer FRS102 paragraph 8.6).
Centrus view this as a good outcome for housing associations and we will be working with the Housing SORP Working Party in resolving this matter when the FRC review FRS102 in the future.