Two sets of accounting standards for the price of three?
DOES THREE into two go?
That was a question, among many, asked at the ASB’s Plans for the Future of UK GAAP debate, hosted by the ICAEW’s Financial Reporting Faculty.
That particular question wasn’t necessarily a mathematical one – but in some ways it was.
I’ll stop talking in riddles now.
With the introduction of international standards to replace UK GAAP it was put out to the audience whether a three-tier system was really needed, as much to provoke discussion than being a serious set-in-stone plan.
Currently we have IFRS for the biggest public entities; then UK GAAP; followed by the FRSSE for the smallest businesses. International standard IFRS for SMEs would wholly replace UK GAAP, and be known over here as FRSME.
FRSSE has proved popular since it was introduced 15 years ago, despite strong resistance from accounts preparers at the time, said Baker Tilly partner Danielle Stewart at the event. “An old friend” was her term for the standards.
If the FRSSE works so well, then why not use that as the basis for the middle-tier of accounting standards, as opposed to the international option? I hasten to add that she posed this more as a Devil’s Advocate than a true believer.
The problem would be, she suggested, was that the FRSSE is based on UK GAAP and as such is considered out of date, outmoded.
And while UK GAAP has been lauded for how it deals with deferred tax, compared to international standards, keeping that could be difficult as you would have to take into account how tax is deferred for financial instruments. UK GAAP isn’t set up to handle financial instruments.
Another bone of contention discussed at the event was the simplicity of IFRS for SMEs. While this has been lauded, audience members flagged up that in their sectors the new standards would leave some glaring holes.
And what about the ASB? Without UK GAAP the body might merely exist to incorporate and manage changes driven down from the international standard setters on what would be likely a three-yearly basis.
The ASB doesn’t pretend to have all the answers. What it desperately wants is more comment from users and preparers of accounts. Users in particular.
So get in touch. It’s seeking comments by 13 April 2011. Comments can be sent to firstname.lastname@example.org