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April 28, 2009

Simplified IFRS should be used by everyone, says PwC UK partner

IFRS for Non-publicly Accountable Entities (NPAEs) could be used as a base for developing accounting standards for all companies, according to PricewaterhouseCoopers UK senior technical partner Peter Holgate.

IFRS for NPAEs is a simplified set of full IFRS due to be released by the International Accounting Standards Board (IASB) in the next few months. The new standards provide an opportunity to move towards more simplified standards in general, Holgate said.

The simplified standards could perhaps be used as a base, then stakeholders should justify why extra requirements are needed, he explained.

“Even those of us that do technical work struggle to keep up with all the developments [in accounting standards] and it must be harder for people who have got companies to run, so anything that can simplify things is a good thing,” Holgate explained. “Given that the IASB has done a lot of work in recent times in developing something that is simplified, and yet quite a good standard of accounting, we should latch onto that as much as we possibly can.”

Holgate said the way his theory could be applied is that each time a standard is developed or revised, standard setters could begin with the simplified version and then test what further complexity is required.

He warned there is a danger the trend could move the other way.

“When [standard setters] are setting full standards they might say ‘now we have got this standard for private entities, the rigours of full IFRS only apply for listed companies and they are very sophisticated, so we can pile on the requirements heavily’,” Holgate said. “I am keen to build in something that works against that.”

The level of simplification would vary by sector. For example now would not be a good time to ease reporting requirements on banks, but in most non-financial sectors a lot of detailed disclosures are there to cater for occasional occurrences, Holgate explained.

“I think you could [get rid of a lot detailed disclosures] for most sectors without any serious loss of understanding,” he said.

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