The future of UK GAAP
The ICAEW’s Financial Reporting Faculty recently held a seminar to discuss proposed changes in financial reporting regulations for UK businesses. AccountingWEB.co.uk’s consultant practice editor Mark Lee reports from the event.
The ASB released a policy proposal last August that set out the future of FRSSE, which is likely to have a major impact on the preparation and content of accounts for both large and small firms. Thanks to section 25 ITTOIA 2005 (previously s42 Finance Act 1998) GAAP determines the computation of the underlying accounting profits of all UK businesses – including sole traders and partnerships.
The ICAEW's seminar brought together the threads covered in the ASB's policy paper The future of UK GAAP: the publication of the IASB's IFRS for SMEs in July, the ASB’s related policy proposal in August, and the Eurpean Union's consultation on IFRS for SMEs. The closing dates for representations are 1 February 2010 (ASB) and March 2010 for the EU document.
Applying the IFRS for SMEs
Brian Shearer, national director of financial reporting at Grant Thornton, spoke about the impact of the new IFRS. The document in question is about 10% the size of the full IFRS and much of it would be familiar to those who already work with the FRSSE and UK GAAP. In some places it’s “even simpler” than UK GAAP, but Shearer alerted the audience to changes in the reporting of both basic financial instruments and other financial instruments.
Other big changes relate to deferred tax and a variety of topics that rarely arise in the smallest of companies. Indeed, a number of relaxations are permitted to avoid entities having to change too much.
Perhaps the most significant day to day change will be the terminology used, which will require similar adjustment to that needed with tax law following the Tax Law rewrite. Shearer highlighted the different issues that would be relevant for companies moving to IFRS for SMEs from UK GAAP or from the FRSSE. As things stand, smaller companies could stay with FRSSE (or even adopt it if currently following UK GAAP).