Out with the old, in with the new

International standards should be the basis for all accounts prepared in the
UK, as soon as is practicable. UK GAAP, which so many of us were brought up
with, should then be consigned to history, along with old money and vinyl

Why? We believe the UK should take the lead internationally in moving towards
full consistency in financial reporting between sectors and across geographical

But note the caveat – as soon as is practicable. The missing piece in the
jigsaw is the International Accounting Standards Board’s ‘SME project’. This
should deliver a greatly simplified set of international standards for small and
medium-sized enterprises.

ACCA set out its stall recently in our response to the IASB’s consultation
document on future reporting requirements of UK companies. We do not believe
that maintaining the current three regimes – International Financial Reporting
Standards for listed companies, UK standards for large numbers of other
companies and FRSSE (Financial Reporting Standards for Smaller Entities) for
small businesses – is sensible. Quite simply we would replace the last two with
the IASB’s SME regime.

This would mean full IFRS being extended to: all other sorts of UK quoted
companies; financial institutions; very large private entities and subsidiaries
in groups where the parent company prepares IFRS accounts. All other entities
would use the SME regime, with the option to go for full IFRS.

We appreciate that there will be some cost implications but the current
system cannot stand still. Maintaining UK standards as a third middle layer is
almost certainly the more expensive option. Aligning UK standards with the
IASB’s will achieve savings in terms of training and education. It will also
contribute to greater consistency for users of accounts across business sectors
and geographical boundaries. The AIM market is already showing the way forward
by extending IFRS to its listed companies.

ACCA has been a strong supporter of the entire IFRS project – believing the
ultimate goal of one set of global reporting standards is worth the short-term
pain. But we note and share a growing concern that standards are becoming
over-complex and impenetrable. It is crucial that standard setters do not lose
sight of the fundamentals of what accounts are for. If users cannot understand
them, then we have gone wrong somewhere.

This is the biggest threat to the adoption of international standards in the
UK and around the world.

Richard Aitken-Davies is ACCA vice president

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