The English ICA has joined the chorus of disapproval surrounding the Accounting Standards Board’s exposure draft on fixed assets, FRED 17.
When it filed its formal response to FRED 17 last week, the institute’s financial reporting committee highlighted the ASB’s ‘slow progress’ on an accounting standard for fixed assets, and documented over 40 concerns.
Committee chairman Robert Hodgkinson, an Arthur Andersen audit partner, was concerned FRED 17 proposed reporting fixed asset disposals in the statement of total recognised gains and losses (STRGL).
‘In the long term, we believe the STRGL should not be a separate statement from the profit & loss account,’ said Hodgkinson. ‘FRED 17 would pre-empt the board’s forthcoming review of FRS3: Reporting financial performance by requiring a piecemeal amendment of that standard.
The institute committee disagreed in principle with the requirement to revalue assets prior to disposal, and said the proposal would increase costs.
Kingston Smith audit partner Peter Holgate said: ‘The requirement to make professional evaluations every year is fine for large organisations, but for a small private firm it is a costly and unnecessary exercise.’ Holgate, who advises a number of private property companies, added the draft differed from industry practice in proposing to cease capitalisation of property investment costs when the property is ready for use, rather than when it is let.
The institute’s criticisms follow contributions from the Scots ICA and the Oil Industry Accounting Committee, both of which pressed for profits from disposals to be recognised in the p&l account.
The ASB is understood to favour replacing the STRGL with a single performance statement but, as the ICA financial reporting committee pointed out, the need to deliver a standard for fixed assets conflicts with its longer-term strategy.
ASB TACKLES 2000
The Accounting Standards Board’s Urgent Issues task force last week issued preliminary guidance advising companies to estimate the total costs of upgrading their computer systems to cope with the year 2000 and to disclose the figures in their annual accounts.
Apart from the need to work out the likely costs, the taskforce agreed the main elements of the draft circulated last November, which requires companies to disclose year-2000 expenditures in the year they are committed. The abstract also stipulates entities should provide additional information on year-2000 preparations in operating reviews or directors’ reports.
The taskforce published similar guidance covering the conversion of financial systems to handle the single European currency.
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