14 November 2016

ICAEW: Financial reporting in a post Brexit world

[...]Paul George began by explaining what he thought Brexit will mean for financial reporting in the UK: “The accounting framework for UK companies – and listed companies in particular – is very much driven by EU legislation. While Brexit gives us a chance to consider whether this will remain appropriate going forwards, it doesn’t mean we have to rip everything up and start again. Listed companies want to provide investors with the information they need to make informed investment decisions. And what investors want is high quality financial reporting based on standards that are transparent and comparable with those used by other listed companies around the world. They want information that is equivalent to that produced by their peers in Europe and beyond. It is imperative for preparers wishing to raise funds on international  markets that the standards they need to apply in the UK are deemed equivalent internationally. And the only way we are going to achieve that is by sticking with an IFRS based solution”.

But what about the vast majority of UK companies that are not listed and do not apply IFRS? Will Brexit have any impact on the standards they apply?

Not in the short-term according to George: “The Prime Minister has promised to introduce a ‘Great Repeal Bill’ in the wake of Brexit. But it is more about continuity than change, as taken at face value what will happen, in effect, is that all existing EU law will be transposed into domestic law on the day we exit. It will then be for parliament to – over time – make the changes they think are necessary to any aspects of the law that they think need amending. This will be a complex and time consuming process. But I don’t think it is likely that there will be any significant change to our domestic accounting standards as a direct result of Brexit. UK GAAP has gone through a lot of significant change in recent years so it seems unlikely that many people would want to undo that and change everything again".

While the new UK GAAP is by no means perfect, many people will be pleased to hear that there are no plans to abandon what has been achieved in the last few years. George has a clear message for those who harbour hopes that Brexit may mean turning the clock back and returning to the old regime: “Accountants – including myself – are not always the world’s best at embracing change. But we undertook a full and open consultation before introducing the new UK GAAP and the vast majority of those who responded fully supported our approach".

Full article

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