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Kreston UK comments on The Future of Financial Reporting in the UK and Republic of Ireland

May 4, 2011

Kreston UK comments on The Future of Financial Reporting in the UK and Republic of Ireland.

In 2010 the UK Accounting Standards Board (ASB) issued its proposals to change the basis of UK GAAP and bring it in line with International Financial Reporting Standards (IFRS).

The proposal is to replace the existing system with a three-tier financial reporting framework namely:

1) Tier 1 – publicly accountable entities would apply EU-adopted IFRS

2) Tier 2 – all other UK entities other than those who can apply the UK Financial Reporting Standard for Smaller Entities (FRSSE – which provides simpler options and reduced disclosure for small entities) would have the choice of using a standard based on IFRS for SMEs or EU – adopted IFRS.

3) Tier 3 – small entities could choose to continue to apply the UK FRSSE to or use EU-adopted IFRS or the IFRS for SMEs.

Kreston UK, which represents the 12 UK, Ireland and Isle of Man member firms of Kreston International has responded to the proposals. The full text is attached.

Sue Almond, Kreston’s Director of Quality and Professional Standards says:

“The members in Kreston UK agree that change is needed to the overall framework for financial reporting in the UK. We welcome ASB’s proposals and support global convergence to international standards, but we do not feel that the time is right to withdraw the FRSEE – it is fit for purpose, our member firms’ clients like it, and stakeholders such as the tax authorities and lenders appear happy with it. SMEs are critical to the UK economy and should not be burdened by unnecessary change at such a sensitive point of the economic cycle”.

Kreston UK also welcome the proposals for reduced disclosures for subsidiaries of Tier 1 or Tier 2 entities, which are often SMEs that get caught up by rules designed for larger and/or publicly accountable entities.

If approved, the proposals will take effect commencing 1 January 2012. The consultation period ended on 30 April 2011, and a wide range of views have been expressed during the consultation period.