Mario Christodoulou, Accountancy Age, Wednesday 15 September 2010 at 13:32:00

ASB plans "fundamentally flawed" says board member

The planned introduction of a new accounting code will distract businesses ata key point in the nation?s recovery, a leading member of the UK?s chiefaccounting board has warned.

Edward Beale, a member of the Accounting Standards Board (ASB), has writtento Edward Davey, minister for employment relations, believes the planned rollout of a new UK accounting code for non-listed companies will be a distractionas companies are trying to get back on their feet.

?The current economic crisis increases the importance to the UK economy ofgrowth in the SME sector. Changes to UK [accounting framework] at this point intime are an unnecessary distraction that can easily be avoided,? he said in theletter, seen by Accountancy Age.

The ASB plans to switch from the UK?s current accounting rules to newinternational standards on January 1, 2013. The move will affect an estimated45,000 medium-sized businesses which are not listed, along with an ?unknownnumber of unincorporated entities? according to Beale.

He said the change will ?both make it more expensive to prepare and interpretaccounts, and?will, on balance, provide a lower quality of information?.
</br>He believes businesses will have to, on mass, review their banking agreementswhich are based on accounting numbers.

Beale urged the employment relations minister to ?ask the ASB to reconsiderwhether this is the right part of the economic cycle to be considering majorchanges to UK [accounting rules], especially since any changes are likely to hit[small and medium sized businesses] hardest.?

In another letter to Baroness Hogg, chairman of the Financial ReportingCouncil, he said he believes the ASB?s proposals to be ?fundamentally flawed?.

?I am concerned that the ASB?s apparently unquestioning proposal to adopt[international accounting rules] with minimal changes could significantly harmthe ASB?s reputation,? he said.

?There is a danger that the ASB is perceived to have been taken over bytechnical experts.?

Instead, Beale wants another round of consultation, following on from anearlier round in February.

Ian Mackintosh, chairman of Accounting Standards Board, said there will be afurther round of outreach when the draft accounting standards are released forconsultation later this year.

?The exposure draft is another consultation and we will be trying to outreachas much as possible with users and encouraging them to respond," he said.

He said Beale's view that only select accounting rules be incorporated intoUK rules and not the full body of international accounting requirements will bereflected in the draft as well.

"We are going to publish that alternative view in the exposure draft and givepeople a chance to comment on it," he said

Further Reading:

ASB sounds death knell for UK GAAP