Britannia Radio

Ian Mackintosh on IFRS for SMEs and UK GAAP changes

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Posted by Gina Dyer in Financial reporting on Fri, 20/11/2009 - 10:03

• The IASB issued IFRS for SMEs and the ASB recommends picking it up for medium sized UK firms
• The ASB has also put forward new proposals for UK GAAP
• These proposals suggest publicly accountable companies should use full IFRS
• The new proposals aim to create less complex financial reporting in the UK

Ahead of his lecture at next week’s Institute of Certified Bookkeepers Annual Conference, ASB chairman Ian Mackintosh lays out the organisation’s vision for a ‘more rational’ financial reporting system.

Q: Your lecture is going to be on the new changes being proposed to the way in which micro and small businesses present accounts.  Can you tell us more about these changes?

A: “The changes are broader than that and will include both large companies and small companies. The IASB recently issued IFRS for SMEs. The ASB’s proposals propose that we pick it up for medium sized companies in the UK.

“The UK has always formed its own standards, in 2004 however Europe decided that listed companies that do consolidations should use international standards, which meant the UK had to abide by that. Since then in the UK, the listed consolidators have had international standards and for the rest we’ve had UK GAAP. Now the ASB is putting out a new proposal for UK GAAP which says that publicly accountable companies must use the full international standards. The FRSSE (which is for the very small companies) will continue. Then for the companies in between, the idea is to pick up the IFRS for SMEs, so there would be three tiers”.

Q: What effect do you hope it will have for businesses in the UK?

A: “We hope it will lead to less complex financial reporting for the vast majority and we’ll eventually get to one framework – at the moment we’re working under two frameworks since Europe decided to adopt the international standards, so this would bring us back to a more comprehensive basis. We’re hoping that it will be suitable accounting for smaller companies”.

Q: The consultation is open until February. What are you hoping will come from this?

A: “It’s open to everybody who uses the standards, so we really do want to hear from people as to how they would be affected. Are there are things we haven’t thought about? Are there worries they’ve got about some of the proposals? This is a really the time for us to find out. We’ve put this consultation document together but we’re really seeking to find out from the people on the ground how it’s going to affect them and whether they like it or don’t like it, and that’s important to us, because we haven’t made up our minds – this is a proposal and then we’ll listen to what people tell us”.

Q: You’ll be discussing this with bookkeepers in more detail next week. What should they be looking out for and how is it likely to affect them?

A: “One of our proposals is that we keep the FRSSE for the very small companies. For a lot of them there would be no change if we kept the FRSSE because that’s what they’re using now and that’s what they’d continue to use in the future; the only thing we have said is that we’ll gradually change the FRSSE to make it more like the international standards, so we’d like to get their opinion on that and whether we should keep the FRSSE and whether they think that’s a good idea.

“We’d also like to talk to them about whether this will have any affect on XBRL and on what we’re proposing. We’ve also been hearing from some very small building societies and credit unions that they don’t think they should use full IFRS because they’re so small - so there are a lot of issues like that which they need to think about”.

Q: Some commentators have expressed concerns about the cost of implementing the proposed new standards. What would you reply to this?
A: “We’d like to think about that and hear what they think the cost will be. We hope that it will be a one-off cost, but even then you can’t ignore it – it’s a cost/benefit exercise. If the benefits don’t exceed the costs then you shouldn’t proceed. In the long-term we’re hoping it will lead to a more rational system for the country, but we need to consider what the short-term costs are as well”.

The Institute of Certified Bookkeepers Annual Conference will be held on Thursday 26 and Friday 27 November at the BIS Conference Centre in London. For more details seewww.bookkeepers.org.uk.