(Accountancy Age) The UK’s largest corporations have become the main beneficiaries of international accounting standards with smaller companies felling little benefit, according to internal research by the Department of Business (BIS).
The research, summerised in a document seen by Accountancy Age, found that, “the main beneficiaries have been the largest corporations”. The research will undermine preparations by the UK Accounting Standards Board (ASB) to replace current UK GAAP with international standards for SMEs.
The IFRS for SMEs project will force an estimated 80,000 businesses to switch accounting codes to new international rules. Accountancy Age understands, BIS is concerned the new rules will present an unnecessary burden to businesses recovering from the recession and absorbing the impact of the comprehensive spending review.
In a September 21 letter, BIS corporate law and governance director Richard Carter wrote to ASB chairman Ian Mackintosh warning new accounting rules “could well involve a significant increase in net cost to UK businesses”.
“We had a word last week about the importance my ministers attach to ensuring that any changes to UK GAAP lead to a net reduction in burdens on businesses,” he said.
BIS also urged the ASB not to present the draft standards as a forgone conclusion when they are released for consultation later this month.
“It is important to be very clear from the start that this may or may not lead to a final standard similar to the current (proposals),” he said.
“To avoid this, and the risks of the ASB’s reputation potentially being harmed, it will be important to be absolutely clear throughout the document, that the ASB has not reached a final view on any particular option.”
A BIS spokeswoman said it was essential the new rules “be net beneficial to the UK and its economy”.
Mackintosh stood aside as ASB chairman after he was announced as the new vice-chairman of the International Accounting Standards Board last week. The ASB is yet to announce an interim chairperson.
There’s also concern from within the ASB the new code will make accounting more complicated for some businesses. Under the new classification systems all listed companies have to use full international accounting rules.
Companies listed on the PLUS markets, which do not use full international accounting rules, may be forced to contend with complex rules.
“We have pushed a significant number of small entities up into full IFRS,” said ASB board member Andy Simmonds.
“I have doubts whether full IFRS is suitable in view of its increasing complexity and theoretical nature.”
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