Accounting standard concerns ‘not reflected in SME feedback’

HOUSING ASSOCIATIONS’ concerns about the dangers of switching to international financial reporting standards are reportedly not reflected in their responses to the IFRS for SMEs consultation.

Roger Marshall, chairman of the Accounting Standards Board, said this inconsistency means further dialogue is needed, and revealed he plans to meet with the housing association trade body once the consultation has closed on 30 April.

Affordable home providers told the Financial Times transferring to IFRS will cost £150m in red tape, and could wipe £1bn off the current value of assets.

Their concerns relate to property revaluation, which is not allowed under the proposed IFRS for SME rules. If this option is not reinstated, landlords fear their equity will be slashed, leading to possible problems with existing banking covenants.

A further concern worrying housing associations and companies linked to construction is that of capitalisation of borrowing costs. Under UK GAAP, companies with property under development were able to roll the cost of borrowing into the project, making their balance sheet healthier. This option is permissible under full IFRS, but has not been foreseen in FRSME for the sake of simplicity.

The ASB is “still in listening mode”, said Marshall, and is taking these concerns into consideration. As a former housing association treasurer, he claimed to be well-placed to deal with the issues, and said the ASB is waiting for all the responses to come in before taking the next step.

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Fiona Westwood of Smith and Williamson.