UK businesses will face an £80m price tag if new accounting rules come into effect, according to official estimates released today.
The UK Accounting Standards Board (ASB) made the estimate as it launched new accounting codes for an estimated 80,000 UK SMEs. The ASB believes the £78.9m price tag, which includes training, software, preparation, external advice, transition and labour costs, will be recovered as businesses have better access to bank finance as a result of the new standards.
The board believes if the new standards lead to a 0.25% rise in the cost of borrowing, it would lead to a £250m cost saving for UK businesses. However, it concedes “benefits are impossible to quantify in a realistic way”.
It is hoped the new rules, based on international financial reporting standards (IFRS), will provide a simplified and stable accounting platform for UK business, but have so far led to concerns it will increase the burden on businesses.
In a 21 September 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.
Dissident ASB member Edward Beale has also raised concern that “changes to the UK [accounting framework] at this point in time are an unnecessary distraction that can easily be avoided”.
Today’s release received a cautious welcome from the UK’s accounting community.
Isobel Sharp, senior audit partner with Deloitte, said the new standards would lead to far-ranging implications for tax, banking arrangements, systems and performance management.
She said she would prefer to see an unchanged version of IFRS for SMEs, upon which the new standards are based, instead of the hybrid model released today.
“We have urged the ASB to lobby the European Commission so that the IFRS for SMEs may be used directly, but that has not happened. Consequently the financial reporting standard for SMEs is neither fish nor fowl,” she said.
“International consistency is not achieved. Minimising the impact of ending UK GAAP and managing carefully the transition process are similarly not achieved.”
Phil Crooks, head of audit at Grant Thornton, said there had been a great deal of unfair criticism levelled at the proposals.
“It’s just not feasible to adopt a position that there should never be a change to UK GAAP and we should welcome moves to overhaul the system,” he said.
“The majority of these proposals are welcome developments and should be recognised as a positive step forward.”
If adopted, the new changes will affect businesses from July 2013.
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