Accountancy software providers have much at stake when the UK Accounting Standards Board (ASB) releases its plans for the future of UK financial reporting in the next couple of months.
An unfavourable outcome for the software providers could lead to reduced competition and increased costs for their accounting firm clients.
The ASB’s draft proposals, released in mid-2009, would see most entities that currently use UK GAAP move to IFRS for SMEs. The proposed time frame would see the changes effective for financial years beginning on or after 1 January 2012.
The change from UK GAAP to IFRS for SMEs would come at a particularly bad time for software providers because they have been working for a couple of years to create products that allow UK GAAP to be tagged using iXBRL.
iXBRL is an electronic tagging system for financial information. The UK Revenue & Customs (HMRC) has made it mandatory for corporate tax purposes from March 2011.
A waste of time
IRIS Accountancy Practice Solutions managing director Phill Robinson said IRIS completed that work on UK GAAP, which was a seven-figure investment over the past couple of years, at the behest of HMRC.
“Now you have got another body, the Accounting Standards Board, saying we are going to introduce IFRS. So all the work you have spent the last years doing is going to be thrown away… and we have to do the work again, spend more money on putting iXBRL into IFRS for SMEs,” Robinson said.
The burden of creating a product that tags financial statements prepared under IFRS for SMEs with iXBRL could be fatal for some software companies, reducing competition among the companies that serve the accounting profession.
The extra work would also flow into more costs for accounting firm clients.
“Some of the smaller software vendors are creaking at the seams just trying to do iXBRL for UK GAAP,” Robinson warned. “If you turn around and say to them ‘throw away all that work you have done, we’re going to start again and use IFRS’, that could be the straw that breaks the camel’s back for some of the smaller guys.”