Changes ahead for the future of accounting in the UK

The UK’s Accounting Standards Board (ASB) has published revised plans for the future of accounting in the UK

The revised proposals continue to recommend the following:

1)     Replacing all current accounting standards with a single Financial Reporting Standard (FRS). This will reduce the volume of accounting standards from approximately 2,500 pages to 250 pages.

2)    Retaining the financial reporting standard for smaller entities (FRSSE).  The proposals would see the retention of the FRSSE, at least in the short-term.

However, the ASB is now proposing the following major changes to its previous plans:

1)     Elimination of the requirement for publicly accountable entities to use EU-adopted FRS (full IFRS). This effectively means that all UK private companies will be eligible to apply the same standard. However, this will now contain additional disclosure requirements for entities classed as financial institutions including banks, building societies, investment funds, stockbrokers, credit unions, friendly societies and pension schemes.

2)    Retention of existing company law formats. Previous proposals to introduce a Statement of Financial Performance and Income Statement have been dropped. Existing company law formats will instead continue to apply.

3)     Introducing accounting treatments permitted under current accounting standards. This represents a change to its previous policy to make minimal changes to the equivalent international standard. Consequently many existing UK options will be retained including those of revaluing land and buildings, capitalising borrowing costs and carrying forward certain development expenses.

There will nevertheless be a number of changes that the new standard will introduce notably in the areas of derivative financial instruments, deferred tax and agricultural assets.

The ASB is proposing that the revised plans should take effect for accounting periods beginning on or after 1 January 2015, with earlier adoption permitted.

If you would like further information on this, please get in touch with your usual Johnston Carmichael contact or David McBain, Head of Audit on 01343 547492 or email david.mcbain@jcca.co.uk.