The ASB has started the year by living up to their 2011 resolution to release their new proposals for Financial Reporting in the UK and Republic of Ireland. Like many of its readers it has put on weight since it was last exposed but in this case...generally in the right places!

It also takes on a new look as it transforms from the Financial Reporting Standard for Medium-sized Entities (“FRSME”) to the Financial Reporting Standard Applicable in the UK and Republic of Ireland (“UK FRS”).

We applaud the efforts the ASB has made to listen and respond to the views received in their last consultation. In particular we are pleased that they have adopted our suggestion not to take a metaphorical backward step with financial reporting for UK entities.

The ASB’s original plan was to keep UK GAAP closely aligned to the IFRS for SMEs.  However our view, supported by feedback from our clients, was that this approach was too simplistic and that the new standard needed to recognise the developed nature of the UK accounting environment and so we lobbied to incorporate options currently available under UK GAAP that aligned to full IFRS.

The result is that the current plans for UK GAAP will include the following options:-

• The revaluation of tangible and intangible assets;
• Capitalisation of development expenditure; and
• Capitalisation of borrowing costs.

Significant changes to the accounting for Financial Instruments continues to be the main feature of the new standard. Although this will add complexities for entities in the UK it will be a better basis on which decisions can be taken. We will be giving you more details on this in the future as we approach adoption date which has been further delayed to accounting periods starting on or after 1st January 2015.  This will give businesses a longer run up period before the impact of the change is felt.

Many of the headlines surrounding the new exposure drafts will be about the removal of the concept of public accountability.  This is not about bankers’ bonuses but relates to the reversal of the ASB’s original decision to extend the application of full IFRS. This change of heart underlines the importance of the UK FRS to the future of financial reporting in the UK.

We will be bringing you more information as we review the detailed proposals however if you would like a summary of the key points please refer to the following page.