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February 25, 2010

Changing taxonomies

Concerns about UK companies introducing XBRL tagging to UK GAAP financial statements for just one year, before converting to IFRS for SMEs and implementing XBRL all over again, have been voiced during the Accounting Standards Board’s (ASB) consultation on the future of UK GAAP.

All UK companies must tag financial statements using XBRL beginning in 2011 for tax purposes. At the same time, the ASB has proposed to replace UK GAAP with IFRS for SMEs for reporting periods beginning on or after 1 January 2012.

Stakeholders have reacted to the mismatch in timeframes in different ways.

Deloitte UK said companies should have the option of adopting IFRS for SMEs now, which would mean they would avoid implementing XBRL for UK GAAP. Other stakeholders suggested delaying the adoption of IFRS for SMEs to allow companies to come to grips with XBRL first.

However, XBRL Standards Board chairman John Turner told The Accountant that moving from one XBRL taxonomy to another will not be difficult.

He said comparing a UK GAAP taxonomy with an IFRS for SMEs taxonomy would be like comparing two dictionaries that use the same language.

“You can think of it as one is the medical dictionary, one is the legal dictionary, but they are both in English,” Turner explained. “It is true that if you shift from UK GAAP to IFSR for SMEs then the tags, that is the words that you use for expressing performance, do need to change. That said, there is a huge commonality between UK GAAP and IFRS.

“It is a straight forward process to provide, in effect, a mapping table – to say if you were using cash under UK GAAP, you are going to use cash under IFRS and software will be able to implement that in a very automated manner.”

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