Treasury Shares
A draft abstract, published on 8 May in Information Sheet 59, addresses the accounting for treasury shares in the light of new legislation - The Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003 — which allows companies with ‘qualifying’ shares to purchase their own shares and hold them in treasury without cancelling them. Shares held in treasury may be sold, used for an employee share scheme or cancelled at a later date. The aim of the draft Abstract is to ensure that the accounting requirements are in place by December 2003 when the new regulations come into effect. The UITF’s proposals are consistent with international accounting standards and would require treasury shares to be accounted for as a deduction from shareholders’ funds, rather than to be recorded as assets. Comments were requested by 19 June.

Accounting for ESOP Trusts -Proposed Revision to UITF 13
The UITF has also issued proposals (in Information Sheet 60 issued on 8 May) to revise UITF Abstract 13 to require that a company’s interest in its own shares that arises through a holding by an ESOP trust should be accounted for in a manner that is consistent with the proposals for accounting for treasury shares. Thus companies would present own shares held by ESOP trusts as a deduction from shareholders’ funds rather than as assets.

A small change to Abstract 17 ‘Employee share schemes’ is necessary if, as the UITF proposes, the proposed changes to Abstract 13 should come into effect at the same time as the abstract on treasury shares. The UITF has proposed an amendment to Abstract 17, which will remain in place until it is withdrawn by a new financial reporting standard on share-based payment. The amendment minimises the changes to the existing model for determining the expense that is recognised in respect of awards to employees of shares or share options. Comments on the proposed changes were requested by 19 June.

Emission Rights
A draft abstract on accounting for emission rights was published on 19 May in Information Sheet 61.

The UK and several other governments have been developing schemes to encourage reduced emissions of greenhouse gases. Participants in some schemes accept a cap on their emissions and receive tradable allowances to emit pollutants up to the cap; these allowances may be allocated free of charge, or participants may be required to pay for them. Participants can buy and sell allowances in the market. The UK’s Emissions Trading Scheme was launched in 2002; an EU-wide scheme will start in 2005. At present, accounting standards do not provide guidance on the accounting for such schemes.

The proposed abstract is closely aligned to the text of equivalent proposals from the IASB’s International Financial Reporting Interpretations Committee (IFRIC). It proposes that a participant should recognise separately an asset (for emissions allowances held), a liability (for the obligation to deliver allowances for emissions that have been made) and a government grant (where allowances are allocated by government for less than fair value). The UITF decided to consult on a modified international text because the relevant international standards and current UK standards produce similar accounting. The intention is that, subject to consideration of comments from respondents, the finally agreed international solution would be introduced into UK accounting. Comments on the proposals were invited by 14 July.