How IFRS has destabilised financial reporting for UK non‐listed entities
| Date | 20 November 2007 |
| Pages | 394-408 |
| Published date | 20 November 2007 |
| DOI | https://doi.org/10.1108/13581980710835254 |
| Author | Stella Fearnley,Tony Hines |
| Subject Matter | Accounting & finance |
How IFRS has destabilised
financial reporting for UK
non-listed entities
Stella Fearnley and Tony Hines
University of Portsmouth Business School, Portsmouth, UK
Abstract
Purpose – The paper aims to trace the development of attitudes towards financial reporting
solutions for entities not subject to the European Union (EU) Regulation. This Regulation mandated
application of IFRS for the group accounts of listed companies for financial years beginning 1 January
2005. It seeks to evaluate the alternatives in the light of changing attitudes to IFRS, and the accounting
model being adopted, particularly focusing on the problems facing smaller companies.
Design/methodology/approach – The paper employs qualitative analysis of data from two main
sources: first, a series of interviews with financially literate individuals before IFRS was implemented
in the UK; and second, from responses to ASB’s consultations on the future of financial reporting for
non-listed entities.
Findings – The increasing perception is that IFRS is overly complex and is complicating the search
for appropriate form of financial reporting for entities not covered by the EU Regulation. In particular,
there is a difficulty in knowing the correct dividing point between large and small company
accounting, and views on this have evolved over time. The needs of small and medium enterprises
appear to have been ignored in the debates dominated by the requirements of global players.
Research limitations/implications – The implications are that further, possibly more radical
policy options need to be considered for smaller companies to ensure that the costs of financial
reporting remain in proportion to the benefits.
Originality/value – The paper identifies the changing views in the UK of the suitability of IFRS for
non-listed entities.
Keywords Regulation, Accounting standards, Smallto medium-sized enterprises
Paper type Research paper
Introduction
In 2002, the European Union (EU) issued a Regulation (EU, 2002) requiring all EU
listed companies to adopt International Financial Reporting Standards (IFRS), set by
the International Accounting Standards Board (IASB), for their consolidated financial
statements for financial years beginning on or after 1 January 2005. Until this time all
UK companies, regardless of size or listing status, prepared their financial statements
under UK Generally Accepted Accounting Principles (GAAP). The Financial Services
Authority Listing Rules required extra disclosures for listed companies and, in order to
accommodate small companies, the UK Accounting Standards Board (ASB) prepared a
Financial Reporting Standard for Small Entities (FRSSE) which brought toget her small
company reporting requirements[1] in one document with some minor concessions to
the overall framework. Thus, UK GAAP with adjustments at the top and bottom end
succeeded in accommodating all UK companies. The UK domestic corporate market
comprises approximately 1,080,000 small companies, 30,000 medium companies and
20,700 large companies (ASB, 2006a) of which roughly 1,500 are listed.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1358-1988.htm
JFRC
15,4
394
Journal of Financial Regulation and
Compliance
Vol. 15 No. 4, 2007
pp. 394-408
qEmerald Group Publishing Limited
1358-1988
DOI 10.1108/13581980710835254
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