ASB technical director David Loweth and IASB chairman Sir David Tweedie urged UK accountants to stop dragging their feet over moving towards internationally based accounting principles.
Loweth unveiled the exposure draft of the new Financial Reporting Standard for Mid-Size Entities (FRSME) to a gathering of Scottish accountants including IASB chairman Sir David Tweedie on Monday.
Resisting calls from Grant Thornton and ICAS members in his audience to delay implementation of the draft even longer than the exposure draft's suggested 2013 date, Loweth said, "We've been consulting for six years or more. It's time we got on with it."
On this point he had Sir David's backing. According to The Scotsman, the IASB chairman chipped in, "People don't like change, but change has got to come to simplify and improve company reporting. If you can't please everyone, you can at least please yourself and crack on."
According to Loweth, he and Sir David put on their "double act" in Edinburgh at the meeting for ICAS members – Sir David's institute and the body to which he will move when he retires from the IASB next summer.
"Sir David did a short presentation on IFRS for SMEs. I followed up with our proposals for UK GAAP, including what we now have to call the FRSME, and to explain why we had to amend it," Loweth told AccountingWEB.co.uk.
In a public comment on FRSME, Grant Thornton called on the ASB to split the roll-out of the revised framework into two stages in the UK, so listed companies could to adopt IFRS with reduced disclosures for subsidiaries as soon as possible, while delaying introduction for private companies until 2015. Waiting for a second phase would allow more time for the economy to recover and let the IASB iron out weaknesses in the IFRS for SMEs.
“There are issues with some elements of the FRSME - particularly the tax treatment - which need to be addressed, and changing accounting standards with a weak economy could prove an unwelcome distraction for private businesses,” said Phil Crooks, head of audit at Grant Thornton,.
"At the same time, listed companies are crying out for the option of IFRS with reduced disclosures as they will be able to use the same accounting treatment for their group and subsidiary accounts without having to make full IFRS disclosures for each subsidiary."
Having published a regulatory impact assessment as part of its Future of UK GAAP proposals, the ASB has come under fire for the £78.9m estimate of the cost of moving to the new standard. Loweth pointed out that the cost assessment goes into very specific detail on how the new standard will affect different sized companies. "Some commentators appear to overlook that FRSME will bring down costs for many companies through more consistent reporting practices. Quantifying those benefits is much more difficult," he said.
PwC partner Iain Selfridge, for example, pointed out: "There may be tax advantages for companies that move to full IFRS or adopt the standard early, rather than waiting until 2013. Depending on their structure and other factors, companies could enjoy a significant tax advantage where early adoption would either slow down the rate at which income is recognised or speed up recognition of cost, as this would defer cash tax payments. Other companies may experience the opposite where cash tax payments are accelerated as a result of transition which will need to be factored in to broader business planning around adoption."
Like PwC, KPMG was supportive of the ASB's proposals and recognised the need for UK-specific amendments to the IFRS for SMEs to align the FRSME with UK company law requirements to prepare consolidated financial statements where the law currently provides exemptions. The ASB also needs to align FRSME's tax requirements with those in IAS 12 Income Tax, KPMG said.
Over the next six months, the ASB will continue with more meetings on the new GAAP proposals, including a "roadshow" with Grant Thornton. In spite of the firm's call for a two-phase implementation, Loweth said it was pretty much on board with the proposed mid-tier standard.
"It's an interesting view that we'll take into account when we receive the responses," he said. "This is the first time we've given people something they can look at and say what they want to change."
