UK companies face a choice between FRS 102 (UK GAAP, designed for entities that do not report under full IFRS) and IFRS (required for UK-listed groups). The differences in how each framework treats intangible assets — particularly goodwill amortisation, development capitalisation, and business combinations — can materially affect reported profits and balance sheet values.
Accounting Framework
FRS 102 vs IFRS: UK vs International Standards for Intangibles
FRS 102 vs IFRS for intangible asset accounting. How UK SMEs and large companies face different rules for recognition, goodwill, and development costs.
| Criteria | FRS 102 (UK GAAP) | IFRS (International Standards) |
|---|---|---|
| Who uses it | UK private companies, charities, smaller groups | UK-listed groups, companies choosing to adopt IFRS |
| Goodwill treatment | Amortised over useful life (max 10 years if indeterminate) | Not amortised — annual impairment testing instead |
| Development costs | Capitalisation permitted if conditions met (Section 18) | Capitalisation required if IAS 38 criteria met |
| Business combinations | Section 19 — purchase method; fewer intangibles separately recognised | IFRS 3 — full fair value allocation; more intangibles recognised |
| Revaluation of intangibles | Not permitted | Permitted under IAS 38 (if active market exists) |
| Disclosure requirements | Less extensive — proportionate to entity size | Comprehensive — IFRS 3 and IAS 38 require detailed disclosures |
| Impairment reversal | Permitted for intangibles and goodwill | Permitted for intangibles; prohibited for goodwill |
When to Use Each Approach
FRS 102 (UK GAAP)
- UK private companies not required to report under IFRS
- Entities preferring simpler reporting requirements
- Companies where goodwill amortisation reduces tax or smooths earnings
- Charities and not-for-profit entities in the UK
IFRS (International Standards)
- UK-listed companies (mandatory for group accounts)
- Companies seeking international comparability
- Entities preparing for listing or cross-border M&A
- Groups with international subsidiaries already on IFRS
Our Verdict
FRS 102 offers simpler reporting with goodwill amortisation (which many private equity owners prefer for its predictability). IFRS provides greater comparability and more detailed intangible asset recognition — essential for listed companies and those preparing for exit. UK SMEs should consider their growth trajectory and likely exit route when choosing.
Related Glossary Terms
Learn More
Ready to Value Your Intangible Assets?
Use Opagio's valuation tools to apply these methods to your own business.