The Financial Reporting Manual (FReM) is a key document that sets out the principles and specific requirements for financial reporting within the UK public sector. It is designed to ensure consistency, transparency, and accountability in financial statements and reports.
Historical Context
The Financial Reporting Manual was established to standardize financial reporting practices across various public sector organizations in the UK. It reflects the ongoing commitment of the UK government to uphold high standards of financial reporting, enhancing the quality and comparability of financial data.
Key Components
- Principles: Core principles ensuring reliability and transparency.
- Requirements: Detailed guidelines on how to prepare financial statements.
- Guidance: Practical advice for implementing the manual’s requirements.
- Updates: Regular revisions to incorporate new standards and regulations.
Types/Categories
The FReM applies to different types of public sector bodies, including:
- Central Government Departments
- Non-Departmental Public Bodies (NDPBs)
- Executive Agencies
- Other Public Sector Entities
Detailed Explanations
Principles of Financial Reporting
The principles outlined in FReM include relevance, faithful representation, comparability, verifiability, timeliness, and understandability. These principles align with the International Financial Reporting Standards (IFRS) but are tailored to public sector needs.
Requirements for Financial Statements
- Statement of Financial Position: An overview of assets, liabilities, and equity.
- Statement of Comprehensive Income: Details of income and expenses.
- Statement of Changes in Equity: Changes in equity over the reporting period.
- Cash Flow Statement: Summary of cash inflows and outflows.
Importance and Applicability
The FReM is crucial for:
- Ensuring consistency in financial reports across public sector organizations.
- Promoting transparency and accountability in public finance.
- Enhancing the comparability of financial statements over time and between entities.
- Facilitating better decision-making and resource allocation.
Examples and Applications
- Government Departments: Annual reports and accounts.
- Agencies and NDPBs: Financial statements to stakeholders.
- Audit Reviews: Using FReM as a standard for compliance audits.
Considerations
- Regular Updates: Staying informed on revisions to FReM.
- Training: Ensuring staff are well-trained in FReM requirements.
- Software: Utilizing financial reporting software compatible with FReM.
Related Terms with Definitions
- IFRS: International Financial Reporting Standards, global standards for financial reporting.
- GAAP: Generally Accepted Accounting Principles, a framework of accounting standards.
- Accrual Accounting: Recording revenues and expenses when they are incurred, regardless of when cash is exchanged.
Comparisons
| Aspect | FReM | IFRS |
|---|---|---|
| Scope | UK Public Sector | Global, private, and public sectors |
| Customization | Tailored for public sector needs | General-purpose financial reporting |
| Regulatory | Government regulations | International standards |
Interesting Facts
- The FReM is continuously updated to reflect changes in accounting standards and government policies.
- It plays a critical role in maintaining the UK’s reputation for high-quality financial reporting.
Inspirational Stories
FReM has helped various UK public sector organizations improve their financial transparency, leading to better public trust and efficient use of public funds.
Famous Quotes
“Accountability is the cornerstone of effective governance.” – UK Government Financial Reporting Team
Proverbs and Clichés
- “Transparency breeds trust.”
- “Accountability ensures progress.”
Expressions
- “Following the FReM.”
- “Compliance with FReM standards.”
Jargon and Slang
- FReM Compliance: Adhering to the requirements of the Financial Reporting Manual.
- FReM Update: The latest revision or change in the manual.
FAQs
What is the FReM?
Who needs to comply with FReM?
How often is the FReM updated?
References
- UK Government Financial Reporting Manual (FReM)
- International Financial Reporting Standards (IFRS)
- Generally Accepted Accounting Principles (GAAP)
Summary
The Financial Reporting Manual (FReM) is a comprehensive framework essential for ensuring high-quality, consistent, and transparent financial reporting across the UK public sector. It aligns closely with international standards while catering to the specific needs of public sector organizations, promoting accountability and better governance.
This entry provides a thorough understanding of the Financial Reporting Manual, making it easier for readers to grasp its significance and application within the UK public sector.
