There is rapid progress towards global accounting standards based on International Accounting Standards that will be used throughout the world by multinational and large national companies alike.
The European Commission has proposed that all listed companies in the European Union should be required to present IAS financial statements by 2005. Furthermore, the US Securities and Exchange Commission is likely to reduce the burden of US GAAP reconciliations for foreign issuers with IAS financial statements.
Given these and other developments, should the UK government require or allow UK companies to use IASs in place of UK standards? Should the Accounting Standards Board adopt all IASs as UK standards? The Convergence Handbook, a comparison between IASs and UK financial reporting requirements, which was published last week by the English ICA, seeks to answer these questions.
The handbook concludes that replacing all FRS with all IASs would undo much of the good work of the ASB. It would remove the requirement for a statement of total recognised gains and losses and the need for compliance with much of FRS 5 Reporting the Substance of Transactions. It would reinstate the flexibility to defer and amortise actuarial gains and losses and make more restructuring provisions on acquisitions. It would ban the UK form of cashflow statement, indefinite useful lives for goodwill and intangible assets, and the timing differences approach to deferred taxes.
As Sir Bryan Carsberg acknowledges in his foreword, the UK has a distinguished record in setting accounting standards. The handbook seeks to build on that record. It proposes the ASB should improve UK GAAP by adopting superior IAS requirements.
It also proposes that the IAS Committee should improve IAS by adopting superior UK requirements. It sets out a programme for the ASB and the IASC, and emphasises urgency on both sides. The ASB is treating the handbook as if it were an exposure draft; the comment deadline is 30 April 2001.