Convergence goes awry

Concerns raised by the Accounting Standards Board on the first-ever
accounting standard compiled by both international standards setter IASB and the
US equivalent FASB could force the two bodies into overhauling the converged new
rule.

The ASB, which is currently in the process of aligning UK standards with
IFRS, expressed its reservations over the draft IASB/FASB standard for business
combinations – merger and acquisitions – in a consultation document released
last week.

The ASB said the proposals raised ‘a number of issues’ and warned that some
of the amendments ‘would not represent an improvement in UK financial
reporting’.

‘All parties interested in financial reporting should be aware that this
represents a major change in UK requirements,’ ASB chairman Ian Mackintosh said
in the consultation document. ‘We urge our constituents to make their views
known to the IASB and to the ASB, so they can be fully considered both in the
international context and as regards their possible implementation in the UK.’

Ken Wild, global head of IFRS at Deloitte, said that the ASB was an
influential body that had the clout to push the IASB and FASB into a rethink of
the standard if it decided to adopt a different approach to business
combinations accounting.

‘The ASB is a respected body and has a reputation for good thinking. It is an
able lobby group,’ Wild said.

‘If the ASB thinks there is something wrong it will say so and this could see
the IASB and FASB make changes to the standard.’

A decision by the UK standard setter to depart from the IASB/FASB standard
will not impact on IFRS at market level, as only smaller businesses will apply
any differing standards. ‘UK-listed companies will still need to prepare
consolidated accounts under IFRS,’ Wild added.

The ASB consultation, which closes on 28 October, will also invite comment on
IAS38, intangible assets; IAS 36, impairment of assets; as well as any amendme
nts to FRS12 and FRS17, contingent assets and liabilities and retirement
benefits.