As reported in Inside Track 47, the ASB's strategy for convergence with International Financial Reporting Standards (IFRS) has generated a lot of debate, but no easy solution. David Loweth provides an update.

Since the last edition of Inside Track, the ASB has continued to consider what its strategy should be for bringing UK and Irish standards into line with IFRS. On 10 May, the ASB issued a press release setting out the Board's tentative proposals and seeking the views of constituents.

The ASB's current thinking, on which it is seeking views, is:

1. All UK Public Quoted and other publicly accountable companies would be required to apply full IFRS, irrespective of turnover and whether they present group accounts or not. This would mean that approximately another 1,000 to 1,500 companies would be require to report under IFRS.
2. The use of the ASB's Financial Reporting Standard for Smaller Entities (FRSSE), which enables small entities to take advantage of simplified requirements, would be extended beyond small companies to include medium-sized entities. This would mean that approximately another 30,000 companies would be able to use the FRSSE.
3. UK subsidiaries of group companies that apply full IFRS would also be required to apply full IFRS in respect of measurement and recognition, but with reduced disclosure requirements (yet to be defined). This would affect approximately 14,000 companies.
4. There has not yet been a decision on companies that do not fall within 1, 2 or 3 above. There are approximately 7,000 companies in this "gap". The alternatives seem to be (i) extend the application of the FRSSE further, (ii) apply IFRS to more companies, (iii) maintain UK GAAP for them, or (iv) some combination of these three alternatives.

The Board requested comments on the above proposals by 31 July. The responses will be analysed over the summer period.

On 19 June, the tentative proposals were discussed at a public roundtable meeting the ASB hosted in Dublin. Participants recognised the difficulties in choosing an option for convergence and no magic solutions were provided. But there were some views expressed on the desire to avoid having three tiers of standards and some support for the proposal to raise the level of applicability of the FRSSE to incorporate medium-sized entities. A general view the ASB is getting is that final decisions on convergence cannot be made until there is a much clearer understanding of the outcome of the IASB project on an IFRS for Small and Medium-sized Entities (SMEs). An Exposure Draft of the SME IFRS is expected in the autumn.