UK authorities predict the end of UK GAAP?

Tuesday, August 25, 2009 | Posted by: Jake Green
Categories: Future of UK GAAP, UK GAAP | Tags: IFRS for SMEs, UK GAAP, Jake Green, UK practitioners, ASB consultation

On Tuesday 11th August the ASB pinned their colours to the mast and issued a consultation paper on their proposals for the future of UK GAAP.  In the paper the ASB announced that they propose replacing UK GAAP with the IFRS for SMEs for accounting periods beginning on or after 1 January 2012.

This may seem a long way away but adopting a new GAAP is more than just preparing a set of financial statements differently.  Companies will need to consider a whole range of possible issues, including:

• making certain tax elections to ensure the most effective tax position
• reviewing and possibly renegotiating their banking covenants
• changing the terms of bonus agreements
• training members of the board to understand the financial statements.

Some of these complications will need to be considered before 1 January 2011 which, if the ASB timeline is followed, will be the start of the comparative period in the first IFRS for SME financial statements.

So, is the ASB timeline for conversion too short?  Perhaps not.  As part of an previous consultation on the future of UK GAAP an earlier draft of the IFRS for SMEs was road tested by UK practitioners.  The outcome?  Overall it appears that no great problems were encountered.

Whatever the timeline, my experience from the transition by listed companies to IFRS is that those who start to plan early find the transition much easier than those who leave it to the last minute.

The ASB consultation is open until 1 February 2010 and amongst other questions they want to know whether 1 January 2012 is too early to transition.  If you want to let the ASB know your feelings on the transition and their proposed timetable visit this website http://www.frc.org.uk/asb/press/pub2054.html

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Find out more on our IFRS for SMEs site