The UK accounting standards board
(APB) has proposed a three-tier financial reporting framework and a
simplified UK standard based of IFRS for SMEs.

The proposed three-tier approach, which has
taken six years to develop, builds on a existing system the APB
described as “an unwieldy and incoherent mixture
of old UK standards and ones that have been partly converged with

According to the proposal,
Tier 1
entities that have public accountability would report under EU IFRS.

Tier 2 entities
without public accountability and small publicly accountable
entities, would report under a new standard
based on IFRS for SMEs, which is considerably shorter and less
complicated than current UK standards. The FRSME, as it would be
called, would be modified to comply with UK and EU law and to ease
tax reporting burdens.

Tier 3 includes
small entities without public accountability. They will continue to use the simplified version of UK standards
known as the FRSSE.

The cost of the transition is estimated at
£78.9million but the APB said it will be
recouped through simplified reporting

The new framework is planned to be effective
for accounting periods beginning on or after 1 July 2013 with
earlier adoption permitted.

The APB consultation period
will run until 30 April 2011.

Grant Thornton UK said the ASB should delay
the introduction of the FRSME for private companies until 2015,
allowing for greater recovery in the economy and waiting for the
International Accounting Standards Board to iron out weaknesses in
IFRS for SMEs during the first planned revisions to the standards
in 2014.

Grant Thornton head of audit Phil Crooks said
the majority of these proposals are welcome developments and should
be a positive step forward.