The Future of UK GAAP

The ASB issued financial reporting exposure drafts (FREDs) 46 to 48 on 30 January 2012, setting out revised proposals for the future of UK financial reporting. These latest FREDs have been developed in the light of comment received on the previous proposals issued in 2010.

The comment period ended on 30 April 2012 and the ASB expects to issue a final standard by the end of 2012. The proposed mandatory start date is for accounting periods beginning on or after 1 January 2015 with early application permitted for accounting periods beginning on or after the date of issue of the final standard. However, current deliberations may mean that the requirements could be early - adopted for December 2012 year ends.

Despite the changes in the updated proposals, there remain some key differences when compared with current UK GAAP. For example:

• Deferred tax recognised on valuations and fair value adjustments in a business combination
• Revaluation movements on investment properties recognised in P&L
• Derivatives recognised at fair value through profit or loss.

Read more in BDOs May 2012 Accounting bites

The changes will not only impact upon the financial statements but on number of topics which rely to one degree or another on the numbers in the financial statements such as:

• Corporate tax charge and cash taxes
• Tax strategies
• Distributable reserves
• Share and bonus schemes
• Management and shareholder agreements
• Debt covenants
• IT and reporting systems
• Operational and financial KPIs
• Training of accounting staff
• Non financial management (including the Board) need re-educating
• Communication with stakeholders requiring sensitive management.

Paul Eagland, Head of Audit and Tax at BDO comments: "The scale of the transition task should not be underestimated. Invariably significant issues emerge: accounting policies, tax accounting, fair values, disclosures – all of which require the exercise of judgement. They can have a material effect on the presentation of the results and this may need to be communicated early to stakeholders. Companies need to plan their transition now, and make sure they engage with their advisors throughout the process."

How BDO can help you?

At BDO we have a unique team incorporating specialists in financial reporting and tax to help guide companies through the changes.

We can help you:

• Assess the impact on your financial statements
• Review the effects of changes on the taxation charges
• Give advice on tax planning schemes
• Provide a detailed review of accounting changes in your accounts
• Convert the comparative current information to relevant set of standards
• Manage the whole transition process.

We are more than happy to discuss with you how the changes may impact upon your business.