Three tiers for new regime
1 Sep 09
Feedback on proposals is being sought in a consultation by the ASB on new standards for UK and Irish entities that converge UK GAAP with IFRS
The Accounting Standards Board has issued a consultation paper Policy Proposal: the future of UK GAAP, which sets out proposals for the future reporting requirements for UK and Irish entities.
The issue of the proposals was deferred pending publication by the International Accounting Standards Board (IASB) of its International Financial Reporting Standard (IFRS) for Small and Medium-sized Entities (SMEs), which the Board believes can play a significant role for future UK GAAP. The IASB published the standard on 9 July.
The ASB’s proposals envisage a differential reporting regime based on public accountability, broadly in line with the IASB’s definition in the IFRS for SMEs, which states that entities do have public accountability if they (a) trade their debt or equity instruments in a public market, and (b) hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses.
The ASB is proposing a three-tier approach to convergence as follows:
Tier 1 – publicly accountable entities would apply IFRS as adopted by the EU.
Tier 2 – all other UK entities other than those who can apply the Financial Reporting Standard for Smaller Entities (FRSSE) could apply the IFRS for SMEs.
Tier 3 – small entities could choose to continue to apply the FRSSE.
Entities within Tier 2 and Tier 3 would have the option of using EU-adopted IFRS if they wished, and those in Tier 3 would have the option of using the IFRS for SMEs.
The ASB has been working with the UK Department for Business Innovation and Skills (BIS) to develop these proposals.
The consultation paper explores whether constituents would prefer to retain the current legal definition of public accountability. This would imply, for example, that all large entities are publicly accountable, and so should be required to follow EU-adopted IFRS. Views on this issue are requested in the consultation paper. The paper also sets out what the ASB sees as the impact of its proposals for public-benefit entities.
Announcing the issue of the consultation paper, Ian Mackintosh, chairman of the ASB, said: “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. 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.”
The board is seeking comments on the proposals by 1 February 2010. In the light of responses to the board, working with BIS, will explore more fully the mechanism needed to implement a differential reporting regime based on public accountability.
See ICAS comment, page 62.