ASB Maps Out Future Of UK Financial Reporting

by Jason Gorringe, Tax-News.com, London

03 February 2012

The UK Accounting Standards Board (ASB) of the Financial Reporting Council has published financial reporting exposure drafts (FREDs) 46 to 48 setting out revised proposals for the future of financial reporting in the UK and Republic of Ireland.

The new drafts have been issued in response to feedback to its previous exposure drafts (FREDs 43 to 45). As a result of feedback received, the ASB has announced significant changes to the previous proposals.

The revised proposals, published on January 30, 2012, recommend:

• Replacing all current accounting standards with a single Financial Reporting Standard (FRS). The ASB is proposing (consistent with its previous proposals) to use the International Financial Reporting Standards (IFRS) for SMEs, as issued by the International Accountings Standards Board, as the base for FRED 48. This will reduce the volume of accounting standards from approximately 2,500 pages to 250 pages;
• Introduction of a reduced disclosure framework. The framework permits certain entities (mainly subsidiaries) to apply the measurement and recognition requirements of EU-adopted IFRS with reduced disclosures; and
• Retaining the financial reporting standard for smaller entities (FRSSE).

As a consequence of feedback to its previous exposure drafts the ASB is proposing the following major changes:

• The elimination of the tier system. The ASB will not proceed with the tier system previously proposed. The application of EU-adopted IFRS will not therefore be extended beyond that required by European regulations or by, for example, the rules of the Alternative Investment Market (of the London Stock Exchange);
• The introduction of accounting treatments permitted under current accounting standards. Options to revalue land and buildings, capitalize borrowing costs or carry forward certain development expenses have been incorporated into the FRED 48. The ASB is proposing to retain accounting treatments permitted under current accounting standards and international accounting standards rather than its previous policy to make minimal changes to the IFRS for SMEs.

The ASB is proposing that the revised proposals should take effect for accounting periods beginning on or after January 1, 2015, with earlier adoption permitted.

The exposure drafts are open for comment until April 30, 2012. Subject to the feedback received it is expected to issue the final standard by the end of 2012.

Roger Marshall, Chairman of the Accounting Standards Board, said: “In developing these exposure drafts the ASB has listened carefully to the many responses to its proposals. The elimination of the tier structure means that the application of EU-adopted IFRS is not extended beyond its current boundaries. The proposals in FRED 48 now fit better with current reporting needs in the UK and Republic of Ireland and will ease its application.”

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