UK-adopted IFRS: what will it look like?
10 March 2020: IFRS as adopted by the UK will replace its EU counterpart when the Brexit transition period ends on 31 December. Will this mean significant change for companies currently preparing accounts under EU-adopted IFRS?
UK-adopted IFRS as at 1 January 2021
UK-adopted IFRS will be identical to EU-adopted IFRS on 1 January 2021. Current legislation provides that all IFRSs that have been endorsed by the EU become UK-adopted IFRS when the transition period comes to an end.
What happens after 1 January 2021?
The power to endorse new or amended standards will lie with the Secretary of State for BEIS who may delegate this responsibility to a designated body. The intention is to delegate these functions to a newly-formed and independent UK endorsement body.
The Endorsement Board is currently being established and is likely to be operational later this year once the appropriate infrastructure, Chair and staff are in place.
When do UK-adopted IFRSs become effective?
UK-adopted IFRS will be effective for accounting periods beginning on or after 1 January 2021. EU-adopted IFRS will be applicable for accounting periods beginning before 1 January 2021.
However, draft legislation currently before Parliament gives UK companies the choice of applying either EU-adopted IFRS or UK-adopted IFRS for accounting periods:
- beginning before, but ending on or after, the implementation period completion day (IP completion day); or
- ending before the IP completion day, when IP completion day occurs before the end of the period for filing the accounts.
Will there be any differences between UK-adopted IFRS and EU-adopted IFRS?
It is possible that differences will emerge between UK and EU-adopted IFRS after 1 January 2021.
IFRS 17 Insurance Contracts has not yet been endorsed by the EU and it is unlikely that it will be by 31 December 2020. There are two narrow scope amendments to IFRSs which have not yet been endorsed and a number of further amendments to be issued by the IASB before the end of the year.
If the UK takes a different view on the endorsement of a standard or amendment, or concludes the process at a different time, it may be that UK and EU-endorsed IFRS diverge.
More information on EU-endorsement status is available on the EFRAG website and on expected IFRS and amendments at ifrs.org.
How can I keep up to date on developments?
In addition to EFRAG’s regular endorsement status report and the IASB’s work plan noted above, ICAEW’s IFRS pages are regularly updated for recent amendments and their endorsement status. See also our recent blog Brexit – what are the implications for financial reporting?
The Financial Reporting Faculty will be issuing further guidance on the implications for financial reporting of the UK leaving the EU and we welcome your views and suggestions. Please email the faculty at email@example.com.
Want to know more? You can attend one of our IFRS events, IFRS webinars or Financial Reporting CPD courses.