PracticeAuditFirms welcome IAS updates

Firms welcome IAS updates

Two new proposals to update international accounting rules on financial instruments have been cautiously welcomed by accountancy firms despite an expected backlash from UK banks.

The publication of the plans to update IAS 32 and IAS 39 is part of a continued drive to converge UK GAAP with international rules, before the 2005 deadline for all listed companies in Europe to switch over to IASs.

Under the new proposals UK banks, especially those with a large loan portfolio, will be hit hardest through their profit and loss accounts. The key proposal is that companies begin valuing their financial instruments at fair value.

KPMG said ‘while we support many of the proposed changes, the standards inevitably remain among those that are complex and challenging in terms of implementation for businesses. We specifically have concerns about the proposed changes for derecognition.’

Peter Holgate, UK senior technical partner at PricewaterhouseCoopers, said: ‘The impact FRED 30 will have on businesses is primarily that those currently disclosing information about fair value in the notes to the accounts will be required to bring these figures directly into the reported results, which will increase the volatility of those numbers.’

He urged British industry and the UK accounting profession to ‘look carefully at the proposals, which will have a significant impact on company accounts’.

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