The Accounting Standards Board has today issued a consultation paper ‘Policy Proposal: the future of UK GAAP’, which sets out its proposals for the future reporting requirements for UK and Irish entities.

The issue of the proposals has been deferred awaiting 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 2009.

The Board’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 or (b) hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses.

The Board is proposing a three-tier approach to developing UK GAAP converged with IFRS as follows:

• Tier 1 – publicly accountable entities would apply IFRS as adopted by the EU (‘EU-adopted’ IFRS).
• 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 Board has been working with the UK Department for Business Innovation and Skills (BIS) in developing 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 consultation paper also sets out what the Board 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 by UK and Irish entities. I would urge all interested parties to consider the proposals and let us have their views”.

The Board is seeking comments on the proposals by 1 February 2010. In the light of the responses to this document, the Board, working with BIS, will explore more fully the mechanism needed to implement a differential reporting regime based on public accountability.
 

1. The ASB is an operating body of the Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The main role of the ASB is to issue accounting standards. The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its standards are developed with due regard to international developments.
3. The ASB has eleven Board members, of whom two (the Chairman and the Technical Director) are full-time, and the remainder, who represent a variety of interests, are part-time.
4. The consultation paper can be downloaded free of charge from the publications page of the ASB website (http://www.frc.org.uk/asb/publications/). Hard copies will be available, price £10.00 (post-free) from FRC Publications, 145 London Road, Kingston Upon Thames, Surrey, KT2 6SR (020 8247 1274). Web: www.frcpublications.com.
5. The IASB’s IFRS for SMEs can be accessed from the IASB’s website at http://www.iasb.org/IFRS+for+SMEs/IFRS+for+SMEs.htm.
6. Press enquiries should be directed to: Ian Mackintosh (Chairman) on 020 7492 2440, David Loweth (Technical Director) on 020 7492 2420, Peter Godsall (Project Director) on 020 7492 2426 or Mario Abela (Project Director) on 020 7492 2442.