In 2017 the Financial Reporting Council announced optional relief for small entities applying FRS102 and FRS102 was 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 was effective immediately with retrospective application available.

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).

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