Accounting Standards - IASC spurns UK provisions
UK standard-setters have been snubbed by ‘inconsistent’ amendments to the International Accounting Standard IAS 22: ‘Business Combinations’, published today.
The UK delegation, headed by Accounting Standards Board chairman Sir David Tweedie, argued IAS 22 should be consistent with the standards on provisioning.
The relevant UK standards, FRS 7 and FRS 10, dictate that provisions can only be made when the resulting liability has been publicly announced.
FRS 10 is essentially the same as the recently introduced IAS 37, which was drafted by the ASB.
Sir David fought to minimise opportunities to feed provisions back into later accounts, but the international board opted for a more flexible ‘outline plan’ definition based on the assumption of a three-month planning period.
‘There is a slight variation with the UK,’ admitted IASC chairman Sir Bryan Carsberg, ‘but they are broadly consistent’.
John Kellas, senior technical partner at KPMG, acknowledged the ASB’s concerns about liberal provisioning, but preferred the IASC’s more flexible approach.
‘If you’re faced with an acquisition, you know you will have to undertake restructuring – and that will influence how much you are willing to pay.
The international standard is probably closer to my heart,’ said Kellas.
The revised IAS 22 standard is accompanied by IAS 38: ‘Intangible Assets’, which necessitated amendments to IAS 16, 28, and 31. Richard Martin, secretary of ACCA’s financial reporting committee commented that these standards also differed from UK practice by insisting that intangible assets be amortised over a finite life span.