ACCOUNTING STANDARDS reform should stretch to encompass the smallest entities, according to the ICAEW.
Dr Nigel Sleigh-Johnson, head of the Financial Reporting Faculty, said the Accounting Standards Board should follow a recent consultation on International Financial Reporting Standards for SMEs (FRSME) with a similar piece of work for smaller companies.
He said: “Retaining separate simplified standards for small companies seems unnecessarily complex; there would be three different rule books for UK accounting. We doubt that this is the optimal solution: it complicates training and systems and increases the risk of error.”
Sleigh-Johnson said a successful move towards entirely IFRS-based accounting standards hangs on the setter’s ability to embed exemptions within the proposed FRSME framework.
Such simplifications as preparing consolidated accounts would reduce reporting requirements and might satisfy users of the current UK GAAP-based FRSSE standard, which is popular and considered easy to use.
The ICAEW has called for a consultation to be launched as soon as possible. Sleigh-Johnson said simplicity “is the critical issue” and that it should be less complicated to have all entities reporting on the same framework. He noted that FRSSE will have to be updated eventually, by which time it could be based on an outmoded UK GAAP.
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