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February 25, 2010

ASB moves onto next stage of UK GAAP project

The UK Accounting Standards Board (ASB) has received more than 150 responses to its discussion paper on the future of UK GAAP.

The consultation was launched six months ago and focuses on moving UK GAAP towards international standards, using a three tier approach:

• Tier 1 – publicly accountable entities would apply IFRS as adopted by the EU;

• Tier 2 – all other UK entities, other than those who qualify to apply the Financial Reporting Standard for Smaller Entities (FRSSE), would apply IFRS for SMEs;

• Tier 3 – small entities could choose to continue to apply the FRSSE.

The ASB will host public events later this year to share its initial analysis of the responses and discuss how the process might move forward. More comments will be welcome at that stage.

The ASB will then publish an exposure draft on recommendations for the future of UK GAAP.

ASB chairman Ian Mackintosh said the responses to the consultation expound different points of view on major topics and the board will carefully consider all points of view to establish the best way forward for UK GAAP.

Most respondents agreed IFRS for SMEs should replace UK GAAP.

Deloitte UK, for example, said that UK GAAP is broken. UK GAAP is based on IFRS and the Big Four firm said annual revisions of IFRS, and the use of full IFRS by some UK entities, makes it difficult to determine what the UK standards actually are.

One issue that raised different views was the timeframe for replacing UK GAAP with IFRS for SMEs.

Deloitte strongly supports allowing IFRS for SMEs to be used on a voluntary basis as soon as possible. Other stakeholders, including mid-tier firm Kingston Smith and the Institute of Chartered Accountants of Scotland (ICAS), said the proposed adoption date set out in the consultation paper, which is accounting periods beginning on or after 1 January 2012, is too soon.

ICAS proposed a transition date of at least two years from the date of publication of the final requirements.

Deloitte expressed disappointment at the length of time it has taken the ASB to resolve the questions about the future of UK GAAP.

“We are disappointed that after four consultations from the ASB over as many years on the this topic, UK business is still facing a lengthy period of uncertainty over the future of UK GAAP,” the firm wrote

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