The ASB has set out its plans for the future of UK accounting standards in the light of the move to the mandatory use of International Financial Reporting Standards (‘IFRS’) for the consolidated accounts of EU listed companies.
The issue of the ASB's Discussion Paper 'UK Accounting Standards: A Strategy for Convergence with IFRS' coincides with a Government Consultation Document 'Modernisation of Accounting Directives/IAS Infrastructure'. The effect of the Government's proposals is that many companies will have the choice of using either UK accounting standards or IFRS.
The Discussion Paper takes as its starting point that there can be no case, in the medium term, for the use of two sets of different accounting standards in the UK, and so UK accounting standards should be brought into line with IFRS. The ASB plans to do this whilst minimising the burden of change on those that choose to report under UK accounting standards.
A phased approach is proposed including:
- new standards effective in 2005 and 2006 that will enhance existing UK financial reporting requirements, maintain their position as highly regarded internationally and adapt to changes in the law; and
- thereafter, a series of 'step changes' replacing one or more existing UK accounting standards with standards based on IFRS as prospective IASB projects are completed.
One of the ASB's main objectives is to avoid requiring two changes of accounting policy in respect of the same issue within a short period. For this reason, it proposes the retention of a number of UK standards where the corresponding IFRS may change following completion of current IASB projects.
The Discussion Paper sets out ASB's current intentions for new standards expected to become effective for accounting periods starting in 2005 and 2006, which are:
- Share options: FRS 20, based on IFRS 2 'Share-based Payment', requiring an expense measured at fair value to be recognised in the profit and loss account for all sharebased payment transactions. This will be mandatory for listed companies in 2005 and for unlisted companies in 2006 (see page 3).
- Financial instruments: From 2005, standards based on IAS 32 'Financial Instruments: Disclosure and Presentation' and, for listed companies (and on a voluntary basis for other companies), much of IAS 39 'Financial Instruments: Recognition and Measurement' (see page 4).
- Retirement benefits: FRS 17 will replace SSAP 24 in 2005 so that, consistent with IASB proposals for IAS 19 'Employee Benefits', actuarial gains and losses are fully recognised in the statement of total recognised gains and losses in the period in which they arise.
- Post balance sheet events: a standard based on IAS 10 'Events after the Balance Sheet Date', replacing SSAP 17 from 2005.
- Earnings per share: a UK standard (applicable to listed companies only) based on IAS 33 'Earnings per share' and replacing FRS 14 from 2005.
- Related party disclosures: a standard based on IAS 24 'Related Party Disclosures', replacing FRS 8 from 2006.
In addition, the ASB may, after consideration of the responses to its Discussion Paper, issue exposure drafts for:
- a UK standard based on IAS 41 'Agriculture' available for use for accounting periods beginning on or after 1 January 2005; and
- revised disclosures in respect of operating lease commitments, based on those in IAS 17 'Leases'.
The Paper also reviews the implications of the move to IFRS for the Financial Reporting Standard for Smaller Entities (FRSSE) and Statements of Recommended Practice ('SORPs').
Whilst the focus of the paper is on the future of UK accounting standards, it also describes the ASB's plans for its future role, including working with and influencing IASB and other international bodies, maintaining dialogue with its constituents and addressing UK accounting issues.
ASB has requested comments by 30 June 2004.
We would like to apologise to subscribers and customers for the poor print quality of the Discussion Paper, which was not up to our usual standards. Our printers have assured us that this will not happen again.
