ASB Issues Revised Proposals for the Future of Financial Reporting Standards
The Accounting Standards Board (ASB) of the Financial Reporting Council has published financial reporting exposure drafts (FREDs) 46 to 48 setting out revised proposals for the future of financial reporting in the UK and Republic of Ireland.
The ASB is issuing these FREDs following feedback to its previous exposure drafts (FREDs 43 to 45). Having listened carefully and considered the matters raised, the ASB is proposing significant changes to its previous proposals.
The ASB’s objective in developing its revised proposals is to enable users of accounts to receive high-quality, understandable financial reporting proportionate to the size and complexity of the entity and users’ information needs.
The revised proposals recommend replacing all current accounting standards with a single FRS. The ASB is proposing (consistent with its previous proposals) to use the IFRS for SMEs, as issued by the International Accountings Standards Board, as the base for FRED 48. This will reduce the volume of accounting standards from approximately 2,500 pages to 250 pages.
It also proposed the introduction of a reduced disclosure framework. The framework permits certain entities (mainly subsidiaries) to apply the measurement and recognition requirements of EU-adopted IFRS with reduced disclosures.
The proposals include retaining the financial reporting standard for smaller entities (FRSSE). As a consequence of feedback to its previous exposure drafts the ASB is proposing the following major changes:
It further proposes to eliminate the tier system. The ASB will not proceed with the tier system previously proposed. The application of EU-adopted IFRS will not therefore be extended beyond that required by Regulation1 or by for example the rules of the Alternative Investment Market.
Other recommendations in the proposals include introducing accounting treatments permitted under current accounting standards; options to revalue land and buildings, capitalise borrowing costs or carry forward certain development expenses have been incorporated into the FRED 48. The ASB is proposing to retain accounting treatments permitted under current accounting standards and international accounting standards rather than its previous policy to make minimal changes to the IFRS for SMEs.
The ASB is proposing that the revised proposals should take effect from for accounting periods beginning on or after 1 January 2015 with earlier adoption permitted.
The exposure drafts are open for comment until 30 April 2012. Subject to the feedback received it is expected to issue the final standard by the end of 2012.
The Department for Business, Innovation and Skills (BIS) has recently launched the company and commercial law theme under the Red Tape Challenge programme. The Red Tape Challenge gives the public an opportunity to comment on the regulations under each theme with a view to reducing and simplifying regulations.
The theme’s objective is to ensure that the UK has a company law framework that gives companies the flexibility to compete and grow effectively. The ASB has worked with BIS in developing its revised proposals and considers that it is in line with the Red Tape Challenge.
The proposed framework allows entities the flexibility to prepare effective financial reports that are proportionate to the size and complexity of the entity whilst reducing significantly the volume of current UK and Irish accounting standards.
Roger Marshall, Chairman of the Accounting Standards Board, said: “In developing these exposure drafts the ASB has listened carefully to the many responses to its proposals. The elimination of the tier structure means that the application of EU-adopted IFRS is not extended beyond its current boundaries. The proposals in FRED 48 now fit better with current reporting needs in the UK and Republic of Ireland and will ease its application.”