2012 will hopefully see a breakthrough in the progress towards changing UK GAAP. Although it is fair to say many practitioners are not in favour of the change, a lot of work is being done at the Accounting Standards Board (ASB) to make sure that the change is as painless as possible for those who will be affected, explains Steve Collings.
When the Financial Reporting Standard for Mid-sized Entities (FRSME) was first issued it contained some quite significant differences between how we do things now as opposed to how the ASB planned FRSME to work in the future. The most notable differences related to prohibition of revaluation of fixed assets and the recognition of deferred tax using a temporary difference approach as opposed to what FRS 19 currently uses which is that of a timing difference approach. In addition the prohibition of capitalising borrowing costs did not exactly bode well with entities such as Housing Associations. There was also a bit of uncertainty surrounding the future of FRSSE.
The board has tentatively agreed to defer the effective date of the new GAAP until 1 January 2015.
In the meeting held on 8 September 2011, the ASB acknowledged that it had received a number of ‘adverse comments’ relating to the inherent complexities contained in its proposals for income tax. The proposals were in line with IAS 12 Income Taxes which recognises deferred tax using a temporary, rather than timing, difference approach. The ASB has asked its staff to develop a revised income tax section which would focus on providing consistent accounting with IAS 12 by applying a timing difference approach with additional tax effects in certain situations.