No easy choices for the ASB on moves to IFRS

Is it or isn’t it a burden? That’s the question facing the introduction of
international accounting standards for SMEs. As far as the Department for
Business, Innovation and Skills (BIS) is concerned the jury remains in
deliberation.

Accountancy Age has seen a key letter from BIS to the UK Accounting Standards
Board which reveals the opinion of government officials. They believe IFRS
“could well” involve
a significant cost for SMEs and that ministers attach “importance” to a change
in accounting code resulting in a “net reduction in burdens on business”.

The pressure is therefore on the ASB to ensure that a change to IFRS is a
cost benefit and not just an extra cost.

This position is easily anticipated. The economic environment is still tough
on business and the government is reluctant to be seen backing anything that
makes life more difficult for the those running small businesses.

Times have been hard enough. More importantly, though, in the midst of huge
spending cuts, government wants business to push the economy forward.

Government support for IFRS then rests on what it does for the economy – and
politicians these days are more sensitive to that than most.

The ASB finds itself in a difficult position. It has been looking at a change
in the UK accounting code for something like eight years. Consultations have
indicated a desire for change, UK GAAP is not being properly maintained and
currently exists as a hodge-podge of inconsistent standards. Something simpler
is required. Unfortunately, the timing is
less than satisfactory.

Plus, there is an outstanding argument that though consultations have taken
place, the polling is yet to really reach the people who use the standards. The
mass of small companies that make up most of the UK economy are notoriously
difficult to reach.

The ASB, a body independent of government, is in an invidious position. The
danger here in pushing ahead is that it is seen as an unthinking body of
bureaucrats inured to the
view of small businesses and the burdens they carry. Its reputation for judgment
and understanding could be seriously damaged. Likewise, its relationship with
government could become tense.

The choices are: push ahead as planned; push ahead but soften the blow; or
delay. Sense would suggest that one of the latter two options is in the ASB’s
agenda.

However, softening the blow could mean many things and standard setters would
need to be sure they do something of substance rather than offering a simple
headline.

There are no easy choices here. But that is in the nature of the times.