The Accounting Standards Board has published its proposals for the future of financial reporting in the UK and Republic of Ireland. The Exposure Drafts set out proposals for a three-tier reporting framework, which aims to balance the needs of preparers and users of accounts.
The document includes an explanation of the proposals, a draft Impact Assessment and the two new proposed standards. The aims include:
- to explain to companies and other entities which set of accounting standards will apply to them; and
- to simplify UK standards into a concise, coherent and updated form.
The proposed three-tier approach, which has been developed and consulted on over the past six years, builds on the existing system. Quoted groups will continue to report under international financial reporting standards (IFRS), as adopted by the EU.
They would be joined in Tier 1 by other companies that are publicly accountable. This would apply if their debt is traded on public markets or if they hold deposits or manage other people’s money. (Some very small financial institutions would be exempt.)
The smallest companies will continue to use the simplified version of UK standards, known as the FRSSE.
Those in between would report under a new standard based on the IFRS for SMEs, which is considerably shorter and less complicated than current UK standards. The FRSME, as it would be called, would be modified to comply with UK and EU law and to ease tax reporting.
An overview of the new framework is available here.
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