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Draft mid-size FRS nears take-off

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25th Oct 2010
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As the Accounting Standards Board puts the finishing touches to the UK's IFRS for SMEs exposure draft, the board is considering whether to delay practical implementation until 2014-15.

UPDATE 29 Oct 2010: The exposure draft Financial Reporting Standard For Mid-Size Entities (FRSME) has been published and is now available as a free download from the ASB website. The consultation period will run until 30 April 2011. It is proposed that the new framework would be effective from 1 July 2013.

At two September meetings, the ASB took note from the feedback it had received that the "far-reaching" proposals "might impose unnecessary burdens on UK businesses" and ordered some minor modifications to the draft standard.

The exposure draft, to be called the Financial Reporting Standard for Medium-Sized Entities (FRSME), will appear "in the next week or so" on the board's website, according to ASB technical director David Loweth and will include a preface emphasising that the board has not closed its mind to alternative approaches.

The technical alterations include: a block on the reduced disclosure framework for a subsidiary's consolidated accounts where section 399 of the Companies Act requires it to prepare group accounts; a clarification that amortisation of goodwill is necessary to meet the requirements of the Companies Act and Accounting Directives unless a true and fair override was applied; and an amendment to ensure compliance with the offset rules in the Companies Act.

Based on a closer inspection of ASB agendas and minutes, John O'Connell, senior manager of Ernst & Young's IFRS accounting advisory team told the Thomson Reuters European user group conference in London that the IFRS for SME implementation schedule "looks like it's going to be pushed back".

The ASB's original timetable was to retire UK GAAP in 2013, but now that is potentially going to go back six months, he said.

The ASB agreed that subject to a six-month consultation period and an 18-month delay between publication of the full standard and the implementation date, the target date for implementation will be 1 July 2013.

That would give 30 June 2014 as the first year end for which reporting under FRSME would be required for qualifying entities - six months later than previous expectations.

"We're going to give some breathing room between publication of the final standard and the implementation date to give people enough time to put the necessary changes in place. The FRED will include an indicative date of 1 July 2013 and one of the questions it poses is about the suitability of that date," Loweth told AccountingWEB.co.uk.

O'Connell welcomed the move. "It gives companies more time to think about converting to IFRS," he said.

Many of the responses to the Future of UK GAAP discussion paper earlier this year – including one from HMRC – lobbied for the delay, partly due to the introduction of iXBRL-based Corporation Tax efiling in April 2011. "It's an awful lot to ask private companies to do in one go," said O'Connell. "ASB has made a sensible precaution...  but it's not official. They may change their minds again."

Following feedback from a public meeting on IFRS for SMEs in July, the ASB is considering reduced disclosure options for smaller companies adopting IFRS, either when moving to the full set of international standards, or the trimmed down FRSME variant.

"You could adopt full IFRS, but with reduced disclosures. You would use the same measurements and rules for timings and transactions without having to publish the financial instrument disclosures. It will be a great option for companies that don't want to have differences in GAAP, but don't want to have to make the detailed financial instruments disclosures," said O'Connell.

The E&Y technical accountant was less clear on what shape the reduced disclosures would take for IFRS for SMEs adopters, and which companies would qualify for that option.

"My challenge to the ASB is we now appear to have five different GAAPs, when the whole idea was to have one. We in the UK are a good example of taking the IASB rulebook and adopting it for our own purposes."

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7om
By Tom 7000
27th Oct 2010 11:06

IFRSME

Another load of regulations...yippeee...good job I havent got anything better to do.

When are the government cuts going to start to bite so all these people making up new rules havent got jobs any more.................

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By AnnaKournikovasKnickers
27th Oct 2010 11:48

government cuts

Or join the FSA? But what would they find to do with the extra shedfull of salary?

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