ICAEW has stressed the need for a due process that minimises the gap between new or amended IFRS standards and interpretations being issued and their endorsement by the UK Endorsement Board (UKEB). This should avoid potential uncertainty which is, it says, unhelpful for both preparers and users of financial statements.
Responding to the Draft Due Process Handbook setting out the proposed due process that the UKEB will follow when assessing the appropriateness of international accounting standards for use in the UK, ICAEW also reiterates its long-held belief that any divergence from IFRS as issued by the IASB should be avoided wherever possible, as the full benefits of IFRS adoption can only be reaped if the standards are adopted in full.
Following the UK’s exit from the EU, the UKEB was established as the independent body that influences the development of IFRSs and the other activities of the IASB and the IFRS Interpretations Committee; andto endorse and adopt IFRSs for use by UK companies.
The draft handbook, published in February this year, sets out the due process that the UKEB will follow in fulfilling these statutory functions; it also describes additional due process steps that the UKEB will follow when carrying out its thought leadership and research activities, performing post-implementation reviews and setting up and operating advisory groups.
Nigel Sleigh-Johnson, ICAEW’s Director, Audit & Corporate Reporting, commented: “ICAEW has taken a keen interest in the establishment of a new mechanism for endorsing IFRS for use in the UK. Effective due process is a key aspect of this. The UKEB’s Draft Due Process Handbook has been well drafted and provides a clear and concise summary of proposed due process activities, but we have made a number of suggestions for improvement.”
In its comment letter prepared by ICAEW’s Financial Reporting Faculty, ICAEW notes that if UKEB is ineffective in its influencing activities, or fails to undertake sufficient outreach to identify UK-specific issues, such issues may not be fully considered by the IASB.
“This could increase the risk that international standards may not be considered conducive to the long-term UK public good and, in turn, could increase the probability of a situation arising where the UKEB may not be able to endorse, in full or in part, an international standard for use in the UK,” ICAEW warns.
“Where there are concerns regarding all or part of a standard, we would prefer the UKEB to work to resolve those concerns by undertaking outreach work and engaging with the IASB to find a compromise that is acceptable to all parties,” ICAEW says in the comment letter.
The letter acknowledges that the UKEB’s ability to carve-out or amend is an important right and gives credibility to its influencing activities; however ICAEW believes that any carve-outs or amendments, or a decision not to endorse a standard, could raise questions about the quality and effectiveness of the UKEB’s influencing activities.
- Read ICAEW’s comment letter on these proposals.
- Read our interview with UKEB Executive Chair Pauline Wallace
- Find out more about IFRS requirements at icaew.com/financialreporting.
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