The planned introduction of a new accounting code will distract businesses at a key point in the nation’s recovery, a leading member of the UK’s chief accounting board has warned.
Edward Beale, a member of the Accounting Standards Board (ASB), has written to Edward Davey, minister for employment relations, believes the planned roll out of a new UK accounting code for non-listed companies will be a distraction as companies are trying to get back on their feet.
“The current economic crisis increases the importance to the UK economy of growth in the SME sector. Changes to UK [accounting framework] at this point in time are an unnecessary distraction that can easily be avoided,” he said in the letter, seen by Accountancy Age.
The ASB plans to switch from the UK’s current accounting rules to new international standards on January 1, 2013. The move will affect an estimated 45,000 medium-sized businesses which are not listed, along with an “unknown number of unincorporated entities” according to Beale.
He said the change will “both make it more expensive to prepare and interpret
accounts, and…will, on balance, provide a lower quality of information”.
He believes businesses will have to, on mass, review their banking agreements which are based on accounting numbers.
Beale urged the employment relations minister to “ask the ASB to reconsider whether this is the right part of the economic cycle to be considering major changes to UK [accounting rules], especially since any changes are likely to hit [small and medium sized businesses] hardest.”
In another letter to Baroness Hogg, chairman of the Financial Reporting Council, he said he believes the ASB’s proposals to be “fundamentally flawed”.
“I am concerned that the ASB’s apparently unquestioning proposal to adopt [international accounting rules] with minimal changes could significantly harm the ASB’s reputation,” he said.
“There is a danger that the ASB is perceived to have been taken over by technical experts.”
Instead, Beale wants another round of consultation, following on from an earlier round in February.
Ian Mackintosh, chairman of Accounting Standards Board, said there will be a further round of outreach when the draft accounting standards are released for consultation later this year.
“The exposure draft is another consultation and we will be trying to outreach as much as possible with users and encouraging them to respond," he said.
He said Beale's view that only select accounting rules be incorporated into UK rules and not the full body of international accounting requirements will be reflected in the draft as well.
"We are going to publish that alternative view in the exposure draft and give people a chance to comment on it," he said
ASB sounds death knell for UK GAAP
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