The FRC’s 2024 amendments to FRS 102 align UK GAAP with the IFRS 13 fair value framework. For accounting periods beginning on or after 1 January 2026, entities holding derivatives must incorporate credit and debit valuation adjustments. The standard, the methodology, and the audit expectation have all changed.
THE STANDARD HAS CHANGED – The 2024 amendments to FRS 102 adopt the IFRS 13 fair value framework. Fair value is now defined as an exit price that must reflect non-performance risk. For entities with derivatives, CVA and DVA are required where material, effective 1 January 2026.
METHODOLOGY REQUIREMENTS – CVA and DVA must use market-implied inputs, not historical default rates. Calculation must be conducted at netting-set level using simulation, not simplified trade-level methods. Credit curves must be constructed where no observable market data exists.
AUDIT AND REPORTING RISK – Auditors trained on IFRS 13since 2013 are now applying that scrutiny to FRS 102 entities. The FRC has identified inadequate CVA methodology as a recurring area of concern. Entities without a documented, compliant approach are materially exposed.
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