Replacement of UK GAAP must pass Government's cost benefit test, ASB warns

The UK accounting board’s plans to replace the existing accounting code with international standards will still have to pass the government’s cost-benefit test, the head of the body warned yesterday.

Ian Mackintosh, chairman of the UK Accounting Standards Board (ASB), said the planned replacement of UK GAAP, used by non listed, mid-tier companies, would still need to be sold to the UK government on cost-benefit grounds.

“We have a new government, we have a strong emphasis on cost saving, on deregulation across all the government and it is going to be very important for us to be very clear on the cost-benefit of making these changes,” he said.

The ASB wants to bring in new international accounting rules for small and medium-sized businesses, released in July 2009 by the International Accounting Standards Board. The new rules will have conform with EU directives on financial reporting and be endorsed by the Department of Business, Innovation and Skills.

Mackintosh appealed to an audience of accountants at the ICAEW yesterday, to help make the case for the new rules.

“As you know in all these cases, the costs we can estimate, but the benefits are very difficult to quantify. Nevertheless, we will be required by the government to make a good case for what ever it is we propose and it is fundamental to the success of the proposals,” he said.

Also at yesterday’s event, Mark Smith, secretary with the influential but reclusive Hundred Group of Finance Directors and director external reporting at FTSE 250 company Tomkins, said the case had not yet been made to replace the UK’s existing accounting code.

“I’m not convinced that now is the right time to commit to scrapping the existing body of UK GAAP,” he said.

“Why is it necessary to have IFRS for SMEs – a form of IFRS light. Doesn’t this mean that there’s actually a problem with IFRS in that they are too complex to be used by many companies?

“I reckon it’s likely that the majority of companies in this country have no idea that the board is proposing these changes let alone that we are sitting here debating them.”

Further reading:

The Future of UK GAAP

Vodafone attacks ‘costly and burdensome’ code change