IFRS for SMEs is not just another name for UK GAAP - it will be different

Tuesday, November 24, 2009 | Posted by: Jake Green
Categories: Future of UK GAAP, UK GAAP | Tags: IFRS, UK GAAP, SMEs, Jake Green, ASB consultation deadline

Recently I attended an ICAEW organised event in Rugby where I was asked to talk about financial reporting.  I asked the delegates, who were accountants from both industry and practice, how many of them had heard about the IFRS for SMEs and the proposals for replacing UK GAAP…..

I was surprised to hear that less than 5% acknowledged that they had heard about the IFRS for SMEs and the consultation.  When asked whether they would prefer to stay with UK GAAP or move to the IFRS for SMEs , the vast majority expressed a preference for the status quo - I was not surprised.  However, if constituents don’t even know that there is a debate raging and that their chance to have a voice in the debate ends on 1 February 2010 (the ASB’s consultation deadline) will the final decision be representative of UK constituents?

Some people may be less concerned by the consultation with the belief that the transition to IFRS for SMEs will not be a big change, but I do not think we should be too complacent.  I think change is coming and with it some big decisions will need to be made, after all, this is not just be an accounting exercise.  Yes, the accounts are going to look different but that impacts on all sorts of things.  For example, companies will need to look at their banking covenants, bonus agreements, accounting systems…(I could go on and on) and consider what tax elections they might wish to take, probably in advance of preparing their first IFRS for SMEs compliant financial statements.

I believe that the ASB are trying to engage constituents in discussions, so either the message is not getting through or decision makers just do not have the time to think about the challenges the new reporting framework will present. 

To those of you that have heard about the proposed change and don’t have the time to engage in the debate I would say one thing.  Speak now or forever hold your peace, we could be wedded to the IFRS for SMEs for some time