Mario Christodoulou, Accountancy Age, Friday 29 October 2010 at 10:27:00

ASB releases IFRS for SMEs for UK businesses

UK businesses will face an 80m price tag if new accounting rules come intoeffect, according to official estimates released today.

The UK Accounting Standards Board (ASB) made the estimate as it launched newaccounting codes for an estimated 80,000 UK SMEs. The ASB believes the 78.9mprice tag, which includes training, software, preparation, external advice,transition, labor costs, will be recovered as businesses have better access tobank finance as a result of the new standards.

The board believes if the new standards lead to a 0.25% in the cost ofborrowings it would lead to a 250 million cost saving for UK businesses,however it concedes ?benefits are impossible to quantify in a realistic way?.

It?s hoped the new rules, based on international financial reportingstandards (IFRS), will provide a simplified and stable accounting platform forUK business, but have so far led to concern it will increase the burden onbusinesses.

In a 21 September letter, BIS corporate law and governance director RichardCarter wrote to ASB chairman Ian Mackintosh warning new accounting rules ?couldwell involve a significant increase in net cost to UK businesses?.

?We had a word last week about the importance my ministers attach to ensuringthat any changes to UK GAAP lead to a net reduction in burdens on businesses,?he said.

Dissident ASB member Edward Beale has also raised concern that ?changes to UK[accounting framework] at this point in time are an unnecessary distraction thatcan easily be avoided?.

Today?s release received a cautious welcome from the UK?s accountingcommunity.
</br>Isobel Sharp, senior audit partner with Deloitte, said the new standards wouldlead to far ranging implications for tax, banking arrangements, systems andperformance management.

She said she would prefered to see an unchanged version of IFRS for SMEs,upon which the new standards are based, used instead of the hybrid modelreleased today.

?We have urged the ASB to lobby the European Commission so that the IFRS forSMEs may be used directly, but that has not happened. Consequently the financialreporting standard for SMEs is neither fish nor fowl,? she said.

?International consistency is not achieved. Minimising the impact of endingUK GAAP and managing carefully the transition process are similarly notachieved.?

Phil Crooks, head of audit at Grant Thornton, said there had been a greatdeal of unfair criticism levelled at the proposals.

?It's just not feasible to adopt a position that there should never be achange to UK GAAP and we should welcome moves to overhaul the system,? he said.

"The majority of these proposals are welcome developments and should berecognised as a positive step forward.?

If adopted the new changes will affect businesses from July 2013.

Further reading:

Letterreveals internal concerns over new accounting code