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IFRS Adoption in the UK

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Rules for listed filings

IFRS required or permitted for listed companies?

Required for consolidated financial statements. Permitted for standalone/separate financial statements.

Version of IFRS

IFRS as adopted by the EU

Are subsidiaries of foreign companies or foreign companies listed on local exchanges subject to different rules?

No

Rules for statutory filings

Is IFRS or IFRS for SMEs required, permitted or prohibited for statutory filings?

IFRS is permitted for consolidated and standalone/separate financial statements. IFRS for SMEs is prohibited. See below for conversion plan.

Parent companies can choose to apply IFRS or UK GAAP. Choosing to prepare IFRS does not mean that all other UK entities within the group need to prepare IFRS. These entities can stay with UK GAAP. If IFRS is adopted by one UK subsidiary, it should be adopted by all UK subsidiaries unless there are good reasons not to do so. Once IFRS is adopted, entities generally cannot go back to UK GAAP. Note that charities are not allowed to use IFRS.

Version of IFRS

IFRS as adopted by the EU

In addition to local GAAP statutory financial statements, are there any other regulatory financial statement requirements that permit or require the use of IFRS?

Some government or quasi-government entities are required to prepare IFRS financial statements as well as Building Societies. Other entities have a choice of IFRS or UK GAAP. However, charities are not allowed to use IFRS.

IFRS conversion plans

Plans for converging

The UK ASB has incorporated some IFRS into UK GAAP. Certain of the standards apply only to some entities. For example, the UK equivalent of IAS 39 (Financial Instruments: Recognition and Measurement) is only mandatory for those who want to use the fair value option and listed entities.

The ASB has issued an exposure draft of a comprehensive standard that will fundamentally change corporate reporting for UK entities that are not currently applying EU-adopted IFRS. The ASB proposes a three-tier structure, along with reduced disclosure concessions for qualifying subsidiaries. Tier 1 is entities that are currently required to apply EU-adopted IFRS under law. Tier 2 is all other entities which apply UK-adopted IFRS for SMEs or IFRS. Tier 3 is small entities eligible to apply FRSSE (Financial Reporting Standard for Smaller Entities). The exposure draft comment period ended on April 30, 2011. A final standard is expected in 2012 and is expected to be effective for periods starting on or after January 1, 2014. Early adoption will be permitted.

Tax information

Type of tax regime

Quasi-dependent. Taxable profit is principally based on the legal entity statutory accounts, with a number of adjustments provided in the tax law.

Comments on tax regime

Any IFRS transitional adjustments are generally taxable in the year of adoption with a number of exceptions, some of which are spread over a 10 year period. There is recent tax legislation that deals with IFRS conversions and which is intended to neutralize most of the ongoing adoption differences. However it is expected that a number of differences will remain.

Plans for IFRS converging as the basis of tax reporting

Not applicable. IFRS is already the basis for tax reporting.