Baker Tilly Looks to Two-Tier System For Financial Reporting

Commenting on the Accounting Standards Board (ASB) consultation on the proposed adoption of the Financial Reporting Standard for medium-sized entities (FRSME), which ended on 30th April 2011, Adrian Hollands, Office Managing Partner at Baker Tilly in Bromley, said:

"The changes proposed by the ASB indicate to the global business community that UK businesses are embracing the need for creating a relevant and transparent financial reporting system suitable for today's global business environment.

"The requirement for transparency is part of a painful lesson which has been learned by many financial organisations as a result of the economic recession and the ASB has taken heed of this requirement with its proposals."

"Good quality financial information should encourage and reflect good and prudent management practice.  The FRSME brings a number of accounting and disclosure changes that will align the reporting of financial performance with risk management practices and ensure that appropriate business decisions are made for the benefit of stakeholders.  At this stage we see this to be a key benefit of the changes proposed. 

"Our own research has indicated that over 70% of business entities based in the UK and subject to UK accounting regulation believe that there is a need for UK GAAP to change and we believe the ASB proposals provide the framework to achieve this result.

"The adoption of FRSME, with minimal changes, will aid comparability with global competitors and is seen by many as the most simple solution, however, there are a number of UK specific financial reporting methods that we consider beneficial and should continue to be embraced within FRSME.

"Growing businesses moving from the Financial Reporting Standard for Smaller Entities (FRSSE) to the FRSME, and possibly to IFRS, would find reduced options not conducive to making key business decisions. While businesses could avoid this by choosing IFRS from the outset, growing businesses should not have to choose to accept a far greater burden of reporting in order to have access to options available under FRSSE.

"Although there is the need for the retention of the FRSSE in the short term, we would suggest that this should be replaced at the earliest practical opportunity. A two-tier system for UK financial reporting based on both public accountability and an international framework of accounting would aid comparability between entities in the UK and globally and would be advantageous in the future. Although there may be some cost implications for the implementation of such reporting for smaller sized entities, the changes for the majority of these businesses would not be substantial.  More concerning would be the long term retention of the FRSSE that could later become a transitional barrier for growing businesses."


MEDIA ENQUIRIES:

Anna Rainbow, Baker Tilly PR, 07890 542588

NOTES TO EDITORS:

• Baker Tilly is the trading name of a number of separate legal entities which together form a £190m (gross fee income), top 10 business of accountancy, tax and business advisers to entrepreneurial businesses.

• Key professional services: audit and advisory, restructuring and recovery, corporate finance (AIM and PLUS specialists), e-commerce, forensic accounting, litigation support, tax and tax investigations, VAT.

• Sector expertise: charities and education, agriculture, automotive, media, manufacturing, pensions, professional practices, public sector, property, social housing, retail and leisure.

• Baker Tilly has over 1,600 members of staff and over 260 partners with 28 offices throughout the UK.

• Baker Tilly International is the world’s 8th largest accountancy and business advisory network by combined fee income of its independent members. It is represented by 147 independent firms in 114 countries with combined fee income of US$3.13bn and 26,000 people worldwide.