Accounting Standards Board - The Future of Financial Reporting, revised exposure drafts
- We would like to express our thanks to the Accounting Standards Board and its staff for the proactive way in which it has engaged with the credit union sector during the consultation process which preceded this series of exposure drafts. We greatly appreciate the way in which the latest proposals take into account the effect that the application of the ‘public accountability’ test would have had upon the credit union sector by imposing disproportionate burdens which would have greatly increased the sector’s costs without providing any commensurate benefit.
- As such we fully support the decision to remove the tier system and the use of ‘public accountability’ as the test for application of EU-adopted IFRS. ‘Public accountability’ would have imposed upon the credit union sector an entirely inappropriate and disproportionate set of accounting standards which, we calculate, would have cost the credit union sector between £6 million and £7.5 million annually; this despite not delivering any material improvement in credit union financial reporting and instead producing even less intelligible accounts for the lay member.
- We accept the ASB’s decision to enhance the FRED’s accounting treatments for financial instruments which should both ensure that sufficient information is provided for account users but also provide much needed guidance for account preparers as to what level of detail is expected for credit union accounts.
- We continue to have concerns about the lack of a clearly defined standardised format for credit union accounts which can lead to inconsistent application of accounting standards and cause credit unions difficulties in sourcing accounting professionals to support their operations. We would like to see measures taken by ASB to improve the level of standardisation in credit union financial reporting, perhaps through the development of a credit union SORP; a process which we are fully prepared to support and which several credit union accounting professionals are keen to facilitate.
- We also support the ASB’s decision to push back the effective date to 1 January 2015. We do, however, have some concern that even this date may not be late enough for those elements around financial instrument measurement and recognition as currently defined in IAS 39, and to be issued in revised form in IFRS 9, to be ready for transposition into [draft] FRS 102. Should IFRS 9 not be finalised in time for a new exposure of [draft] FRS 102 to be conducted and finalised at least 2 years before the proposed effective date (i.e. by 31 December 2012), we urge the ASB to push the effective date back further so that the FRS can be introduced in one, clear process. Not to do so would potentially require credit unions to begin transitioning to [draft] FRS 102 – a significant process of change – before its element on financial instruments (the most substantial element for credit unions) is finalised – or, worse, moving to one new standard only to have to repeat the process once IFRS 9 is ready – making the process significantly more difficult, unclear and, therefore, costly. We feel that it is reasonable to expect all elements of the [draft] FRS to be finalised before transition is considered especially since the current plan will require those credit unions applying [draft] FRS 102 to apply standards derived from IFRS 9 prior to their coming into effect for those directly applying IFRS 9 under EU-adopted IFRS.
- Notwithstanding our support for the much-improved proposals in this exposure draft, we continue to be greatly encouraged by the views expressed in the Alternative View. As was the case with previous Alternative Views in this process, the dissenting member expresses exactly the sentiment which underpins our position, i.e. that as far as possible, financial reporting should reflect the needs of account users and preparers and should therefore provide clear, accessible information about the financial position of an entity thus both improving the quality of financial reporting and reducing its burden upon preparers and the economy more generally. We recognise that this is in conflict with the ASB’s stated aim of converging UK and Irish accounting standards with those agreed internationally, however, there would appear to be a strong case for the Alternative View.
The full response is available to download on the right.