PracticePeople In PracticeNo need for Tory new rule book

No need for Tory new rule book

The Shadow National Accounts Commission believes accounting standards for the public sector should be set by an independent National Accounts Commission.

But the UK already has an accounting standard setter: the Accounting Standards Board. Although its primary remit is to the private sector, the standards are widely used in the public and not-for-profit sectors.

If, as the SNAC believes, the starting point for public sector accounting standards should be private sector standards, why the need for a new standard-setting body? Why write a new rule book when one already exists?

Two separate bodies, each setting standards that are supposed to be close in many respects, will start to diverge in view and conflicts of interpretation would be inevitable; this would undermine the standards in both sectors.

The SNAC report fails to distinguish between the independence of the standard-setting regime and the accountability of the process of applying private sector standards to the public sector, notably resource accounting in central government.

The ASB is an independent standard-setter and follows an extensive due process; the proposed NAC would simply duplicate that structure.

Accountability for application of the ASB’s standards by the Treasury, on the other hand, is provided by the Financial Reporting Advisory Board to the Treasury. Although only advisory, It has the sanction available of reporting direct to parliament a departure by resource accounting from GAAP and it has already taken a robust line on issues such as PFI.

The Public Sector and Not-for-Profit Committee has begun work on a conceptual framework document for the whole of the not-for-profit sector.

But this committee is the ASB’s and its work is one of interpretation – the aim is not to rewrite the ASB’s Statement of Principles, merely adapt it where necessary. Assuming this work proceeds to completion, it will represent the ASB’s own interpretation of its principles, not the interpretation of another, separate organisation.

Keep standard setting in the hands of one body alone – chaos will otherwise surely follow.

  • Kathryn Cearns is the senior professional support accountant at Herbert Smith. She was secretary to the ASB’s PSNC for two years. The views expressed here are her own.

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