New accounting standard to take the pain out of financial reporting
A NEW financial reporting standard for non-publicly accountable companies is being welcomed as a long overdue simplification of SME accounting rules.
The International Accounting Standard Board’s (IASB) SME standard is expected to be mandated shortly in the UK by the Accounting Standards Board (ASB) and according to PricewaterhouseCoopers (PWC) will provide a “much needed” simplification of the rules.
The standard will be different from full International Financial Reporting Standards (IFRS) in a number of key areas including the amortisation of goodwill and by its exclusion of some IFRS requirements altogether such as earnings per share and segmental reporting.
PwC said that disclosure requirements could be up to 80% less than full IFRS.
Randal Casson, Leeds-based partner at PwC’s Leeds office, said: “The publication of this standard is the death knell for UK GAAP and its impact will be felt by far more companies than its title suggests.
“With the subsidiaries of most UK listed groups still using UK GAAP, the change will affect tens of thousand of companies, large and small. The SME standard will make the transition to IFRS easier for many companies.
He added: “After the initial conversion work is done, in the medium term there should be real cost benefits. This will particularly be the case if other countries follow the UK lead and either require or allow IFRS – in either its full or SME form – for all companies.”
Mr Casson added that for larger businesses with complex structures or many non-listed UK subsidiaries, or for companies adopting IFRS for the first time there would be a substanital amount of work converting the accounting records and supporting systems.
Peter Holgate, senior technical partner, PwC, said that companies needed to consider very carefully what exactly was meant by publicly accountable in each country.
“It is likely to cover listed companies and banks and some other financial sector companies. That should mean that most other entities will be able to use the simplified version of IFRS,” he added.
“Full IFRS has for some time been aimed at the global capital markets and it is good that something has been developed that is more geared to the needs of private companies and subsidiaries of groups.
“We urge the ASB to clarify exactly which companies will be able to use the simplified standard when it issues its expected discussion paper later this month.”
