The Federation of Small Business (FSB) has joined the Institute of Chartered Accountants in England and Wales (ICAEW) in calling for a halt to use of international financial reporting standards for small and medium-sized entities (SMEs) in the UK, according to a report in Accountancy Age. The FSB is angry, Accountancy Age said, because the new standards, IFRS, are being applied to small businesses while the International Accounting Standards Board is still developing a separate set of standards for SMEs.
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âMost small companies have issues that are of no interest to anyone outside of the company,â said Neil Hamper, chairman of the taxation committee at the FSB, Accountancy Age said. âSo why do we have to have these top-down standards imposed on us? Some of them can have devastating effects on our business.â
The current convergence program has been initiated by the Accounting Standards Board (ASB), which develops standards for SMEs in the UK. These standards generally follow UK GAAP, but the ICAEW has said, according to Accountancy Age, that the continuing shift in UK GAAP towards IFRS is putting increasing burdens on small businesses. ICAEW has asked that the ASB halt the program until IASB completes its work on standards for SMEs. ICAEW has also recommended that IASB should produce significantly less complex standards for companies without external investors.
ASB chairman Ian Mackintosh said that he thought the Board should consider the ICAEW's suggestions seriously, the Financial Times reported. ASB had planned to make IFRS mandatory as soon as possible for non-listed companies and limited partnerships.
Discontent with IFRS has also been reported among the UK's Top 100 companies, now in the middle of their first IFRS season, according to the Financial Times. The standards have been criticized as too theoretical, making financial statements hard to understand.
âI regard accounts as a communication tool,â Jon Symonds, chief financial officer of AstraZeneca told the newspaper. âPotentially, the clarity of communication about performance and what a business is delivering is being lost in complexity, he added.â
While the commitment of most in accounting in the UK to the goal of a single set of accounting standards for listed companies has not changed, UK companies have found fault with some IFRS in their present form. âFair valueâ accounting which requires assets and liability revaluations to be passed through the income statements, has become more significant, the Financial Times reported. UK companies which have traditionally relied on cash flow, have not been eager to adopt fair value accounting.
Tom Jones, vice-chairman of IASB told the Financial Times that the suggestion that fair value is moving accountants away from economic reality is âludicrous.â
âThere is nothing more real than the value of an asset today,â he said.
Andrew Watchman, a former government accountancy advisor, told the Financial Times that it was premature to conclude that IFRS were producing financial data that is of little value.