Free Accounting Dissertations - But It Also Implies That Either Member Countries Will Lose Their Independence
But it also implies that either member countries will lose their independence to make national accounting standards that reflect local economic conditions or if they start introducing some changes, IFRS may slowly lose its main strength of common standard. Local, political and economical conditions may force national accounting bodies to introduce variations in IFRS. EU has already introduced some changes in the IAS 39 dealing with financial instruments. It is beyond the scope of this research to see which member countries have introduced variations in IFRS.
Convergence between UK GAAP and IFRS
ASB has declared its intention to converge UK GAAP with IFRS. It has issued a number of new standards in December 2004 to speed up the convergence of UK GAAP with IFRS. So sooner, even unlisted companies would be following a substantial portion of IFRS due to this convergence.
Comparison of UK GAAP and IFRS
Similarities
The ultimate goal of UK GAAP and IFRS is same to present information about financial performance and position to all concerned stakeholders. If the aim is same, then should be the main approach adopted by both accounting standards.
The UK’s Accounting Standard Board’s Statement of Principles for Financial Reporting is a vital contributor at macro level standard setting. It plays almost same role as International Accounting Standards Committee’s ‘Framework for the Preparation and Presentation of Financial Statements’. ‘It is a description of the fundamental approach that the Accounting Standards Board (ASB) believes should, in principle, underpin the financial statements of profit-oriented entities’ (ASB, 1999). The Statement of Principles has true and fair concept at its core, much like the focal point in International Accounting Standards. Also like IAS, Statement of Principles insists on financial information being relevant and comparable.
It is beyond the scope of this research to highlight each and every similarity between UK GAAP and IAS.
Differences
Though the overall aim is same, the differences in implementation and financial reporting do occur due to social, economic and political backgrounds of different nations.
Main concepts behind UK GAAP and IFRS are same, but when we look at micro level, we see many differences at the individual standards level. Following are the main differences between UK GAAP and IFRS:
The Statement of Principles allows use of both historical cost and current value approaches in measuring balance sheet categories. The dual use of historical and current value methods is known as modified historical cost basis (ASB, 1999). Under historical cost, the carrying values of assets and liabilities are stated at the lower of cost and recoverable amount. This approach is more conservative as compared to IAS approach which uses fair value method.
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