IFRS Position Paper UK convergence CIMA Position Paper | July 2006
CIMA supports global standards i.e. IFRS and the development of principal-based accounting standards. This paper summarises CIMA’s position with respect to UK convergence in financial reporting. Consistency between UK standards and IAS is important:
•
for the credibility and understanding of financial reporting
•
for those companies who, whilst choosing to continue to prepare their financial statements under UK standards, also wish to ensure that their financial statements are consistent with IAS
• •
as it should simplify the audit of listed groups
as it will facilitate the movement of accountants in business between organisations using either UK GAAP or IAS. In March 2004 the ASB issued a ‘Strategy for Convergence of UK GAAP with IAS’. In this document, the ASB proposals were to adopt UK standards based upon the principles of IAS. There would be a phased approach to convergence rather than the ‘big bang’ approach as adopted by the EU in respect to the introduction of IAS. CIMA, along with many others, supported this strategy. The next step in the ASB’s due process was to issue an exposure draft, which it did in March 2005 ‘Accounting Standard-Setting in a Changing Environment: The Role of the ASB’. This exposure draft reiterated the ASB’s view that it should converge with IAS using a phased approach. The aim would be to bring UK standards fully in line within a period of three to four years. During the consultation period for this exposure draft, the IASB issued an exposure draft on Business Combinations. This document was the result of the first joint project between
IASB and FASB and commentators felt that it contained some quite fundamental changes to the principles of IAS and also highlighted the complexity of trying to converge a rules-based system with a principles-based system. The respondents to the IASB’s exposure draft mainly felt that the correct balance had not been struck and rejected the joint proposals. It is clear that consideration of the Business Combinations exposure draft significantly influenced submissions to the ASB exposure draft. The hostility felt towards the IASB’s exposure draft led to what we believe to have been unwarrantedly negative responses to the ASB’s quite sensible proposals. Many respondents felt that it was the right time for the ASB to reconsider its phased approach to convergence and favoured a pause in convergence efforts before a ‘big bang’ implementation. The ASB listened to the views of its constituents and now proposes to issue new IAS-based UK accounting standards that will not be mandatory before a specific date, currently planned to be financial years beginning on or after 1 January 2009. In CIMA’s view the ASB’s current plan seems to strike the right balance between continued convergence and ease of implementation.
Contact details: The Chartered Institute of Management Accountants, 26 Chapter Street, London SW1P 4NP, United kingdom T. +44 (0)20 8849 2275 | F. +44 (0)20 8849 2464 | E. technical.services@cimaglobal.com W. www.cimaglobal.com/resources