Letter reveals internal concerns over new accounting code

Letter reveals internal concerns over new accounting code

ASB plans "fundamentally flawed" says board member

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

Further Reading:

ASB sounds death knell for UK GAAP

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