Under the EU's IAS Regulation, companies and building societies
with securities traded on an EU regulated market will be required
to use IAS in their consolidated accounts for financial years
commencing on or after 1st January 2005.
The draft regulations – the Companies Act 1985 (International
Accounting Standards and Other Accounting Amendments) Regulations
2004 and the Building Societies Act 1986 (International Accounting
Standards and Other Accounting Amendments) Order 2004 – extend the
application of the IAS Regulation to all other companies and
building societies on a voluntary basis.
This will allow companies and building societies to choose to
use adopted IAS in their individual and/or consolidated accounts.
If taken up, it is expected to improve the transparency,
comparability and quality of financial reporting across the EU and
so lead to a strengthening and deepening of the EU's capital
markets.
It is expected that by 2005 over 90 countries will be using IAS
as part of their financial reporting framework, according to the
Department for Trade and Industry.
The DTI's draft regulations also implement the provisions of the
Accounts Modernisation and Fair Value Directives for companies. The
Modernisation Directive brings EU accounting requirements into line
with modern accounting practices consistent with IAS, while the
Fair Value Directive enables companies to follow modern, more
transparent accounting practices in the area of financial
instruments that are consistent with IAS.
HM Treasury will lay separate draft regulations implementing the
same Directives for building societies shortly.
But with UK listed companies due to implement the IAS Regulation
by 1st January next year, confusion reigns over one specific
standard, namely IAS 39 'Financial Instruments: Recognition and
Measurement'. The confusion follows an EU vote in October to adopt
a version of the standard that is slightly different from that
published by the International Accounting Standards Board.
Speaking yesterday, the UK's Accounting Standards Board urged
all UK companies to comply with the earlier provisions of the
standard and not the amended version, and promised to issue
guidance on the matter as soon as possible.
