ASB sounds death knell for UK GAAP

The Accounting Standards Board has taken the first definitive step towards
the elimination of the UK’s dominant financial language in a position paper
which heralds the end of UK GAAP.

The ASB, moments ago, released a new draft policy which sets the stage for a
future where ‘UK GAAP will cease to exist’.

UK GAAP will be phased out under the draft policy and replaced by a
three-tier system which will result in publicly accountable entities using full
international financial reporting standards (IFRS); non-publicly accountable
entities using new international standards for small and medium sized entities
(SMEs); and small organisations using financial reporting standard for smaller
entities (FRSSE).

Under the proposals businesses will have the option to voluntarily adopt a
higher tier.

‘Our ambition in setting out the proposals in this policy paper is to develop
a high-quality, fit-for-purpose, financial reporting framework that addresses
comprehensively all entities required to prepare financial statements… in
accordance with UK GAAP,’ the document reads.

The ASB has previously expressed its enthusiasm to adopt new international
reporting standards for SMEs which was released to an international audience by
global standard setter the International Accounting Standards Board on July 9.

Any new accounting rules, however, will need to be consistent with the
European Union’s fourth and seventh directive, but the ASB said this has so far
not been an issue.

Ian Mackintosh, Chairman of the ASB, said there was ‘no case’ anymore for a
two-tiered accounting system in the UK.

‘For a number of years, the board has stated that in the medium term there
is no case for the use of two different accounting frameworks in the UK,’ he
said.

‘The recent publication by the IASB of its IFRS for SMEs provides the board
with the opportunity to consult on what we see as the future framework for
financial reporting by UK and Irish entities.’

Isobel Sharp, audit partner at Deloitte, welcomed the move away from the
‘profusion and confusion’ of UK GAAP, but believes the ASB has set an ambitious
implementation date of 1 January, 2012.

‘Three full years’ notice of the rules that will be adopted at that future
date is needed. The tens of thousands of companies that will be impacted can
then consider in detail the potential consequences of the change, make any
amendments across their businesses, test their processes and carry out the
education and awareness activities,’ she said.

Andrew Vials, technical accounting partner at KPMG, wants to see more clarity
surrounding the phrase ‘publicly accountable’.

The ASB’s proposal would allow companies that are not publicly listed to use
the SME accounting rules.

‘A key unanswered question, as the ASB acknowledges, is which entities are
publicly accountable,’ Vials said.

‘This issue evidently needs to be resolved through the consultation process.’

Read the ASB’s proposal:

ASB seeks views on
proposals for the future reporting requirements for UK and Irish entities

Download IFRS for SMEs:

Access
IFRS for SMEs and related material