ASB Consults On Future UK Reporting Requirements

by Jason Gorringe, Tax-News.com, London

13 August 2009

The UK's Accounting Standards Board (ASB) on August 11 issued a consultation paper entitled "Policy Proposal: the future of UK GAAP," outlining its proposals for future reporting requirements for companies in the United Kingdom and Ireland.

The issue of the proposals was deferred pending publication by the International Accounting Standards Board (IASB) of its International Financial Reporting Standard (IFRS) for Small and Medium-sized Entities (SMEs), which the ASB believes will play a significant role for future UK GAAP (Generally Accepted Accounting Principles). The standard was eventually published by the IASB on July 9.

In a statement launching the consultation, the ASB explained that:

"The Board’s proposals envisage a differential reporting regime based on public accountability, broadly in line with the IASB’s definition in the IFRS for SMEs, which states that entities do have public accountability if they (a) trade their debt or equity instruments in a public market or (b) hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses."

The ASB has proposed a three-tier approach to developing UK GAAP converged with IFRS as follows:

• Tier 1 – Publicly accountable entities can apply IFRS as adopted by the European Union ("EU-adopted" IFRS);
• Tier 2 – All other UK entities, except those who can apply the Financial Reporting Standard for Smaller Entities (FRSSE), can apply the IFRS for SMEs; and
• Tier 3 – small entities can choose to continue to apply the FRSSE.

The ASB went on to clarify, however, that entities within Tiers 2 and 3 would have the option of using EU-adopted IFRS if they wished, and those in Tier 3 would additionally have the option of using the IFRS for SMEs.

The Board has been working with the UK Department for Business Innovation and Skills to develop the proposals, and is seeking comment from interested parties until February 2010.

Ian Mackintosh, Chairman of the ASB, said:

“For a number of years, the Board has stated that, in the medium term, there is no case for the use of two different accounting frameworks in the UK. The recent publication by the IASB of its IFRS for SMEs provides the Board with the opportunity to consult on what we see as the future framework for financial reporting by UK and Irish entities. I would urge all interested parties to consider the proposals and let us have their views."

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