There is a flurry of activity at the ASB as the project to develop a new accounting framework for UK entities gains momentum. Project Director Michelle Sansom explains.

The ASB’s proposals in a nutshell

The ASB has been carefully considering the responses to its consultation document ‘Policy Proposal: the Future of UK GAAP’.

The ASB’s proposals are intended to apply to all entities, other than those in the public sector, required to prepare financial statements that give a ‘true and fair’ view. This includes companies and other corporate structures in both the profit and public benefit (also known as not-for-profit) sectors.

The following is an update on the ASB’s tentative decisions to date.

A differential financial reporting regime

The ASB has tentatively decided to propose a differential financial reporting framework that is based on public accountability, consistent with its policy proposal. Entities will be required to prepare financial statements in one of the following three tiers (or may elect to adopt a higher tier):

	Nature of Entity	Accounting Regime
Tier 1	Entities that have public accountability	EU-adopted IFRS
Tier 2	Entities that do not have public accountability	IFRS for SMEs ( UK)
Tier 3	Small entities	FRSSE

Under the ASB’s tentative proposals, an entity which has public accountability is required to prepare its financial statements in accordance with EUadopted IFRS.

Entities that do not have public accountability will apply the IFRS for SMEs, adopted for use in the UK.

An entity that qualifies as a small entity in accordance with the Act may continue to apply the FRSSE.

The ASB has tentatively decided to propose a reduced disclosure framework for subsidiaries. The reduced disclosure framework is available to any subsidiary that does not have public accountability; and whose parent prepares consolidated financial statements in which that subsidiary is included and those financial statements are publicly available.

Role of the IFRS for SMEs

The ASB has tentatively decided to replace existing FRS and UITF Abstracts with the IFRS for SMEs; making only the following amendments to the IFRS for SMEs:

• areas of incompatibility of the IFRS for SMEs with the Accounting Directives.
  
• areas where the IFRS for SMEs permitted options that were not compatible with the Directives.
  
• replacing chapter 29 of the IFRS for SMEs with IAS 12 ‘Income Taxes’.
  

Changes since the policy proposal

The major differences from the policy proposal and the Board’s now tentative proposals include:

1. introducing the reduced disclosure framework for subsidiaries which gives relief for subsidiaries of both tier 1 and tier 2 entities;
   
2. permitting small publicly accountable entities that meet all three of the qualifying conditions of the small companies’ regime but are excluded from the regime to apply the IFRS for SMEs;
   
3. amending IFRS for SMEs which includes replacing section 29 of the IFRS for SMEs with IAS 12 ‘Income Taxes’;
   
4. providing application guidance on the definition of entities which have public accountability; and
   
5. providing transitional relief for dormant companies.
   

ASB Roundtable

On 20 July 2010, the ICAEW hosted a public meeting on the Future of UK GAAP. Ian Mackintosh, Chairman of the ASB, outlined the ASB’s tentative decisions on its redeliberations of the Policy Proposal: The Future of UK GAAP issued in August 2009. Responses to the presentation were received from Robert Humphreys, Finance & IS Director at Oxfam, Danielle Stewart, Partner at Baker Tilly and Mark Smith, Director of External Reporting at Tomkins plc.

Following the presentations there was a lively debate on the key issues and a variety of views were expressed.

It was outlined at the meeting that the ASB’s next steps include developing and drafting a FRED for consultation. The FRED will include an impact assessment. The ASB is issuing a request for responses to aid the development of the impact assessment. Responses can be emailed to asbcommentletters@frc-asb.org.uk. The deadline for responses is 20 August 2010.

The presentation and request for responses are available to download at: http://www.frc.org.uk/asb/technical/projects/project0072.html.