JAMES BARBOUR
Soap Box
SCOTLAND'S accounting experts will be flocking to CA House, the Edinburgh home of the Institute of Chartered Accountants of Scotland, this Thursday to discuss one of the most topical issues surrounding the UK accountancy profession - what accounting standards should apply to small and medium-sized enterprises? It is a significant issue as the Scottish economy is dominated by SMEs.

ICAS is co-hosting the first of the UK Accounting Standards Board's forums to discuss the stance that the UK accountancy profession should take to the recently issued International Accounting Standards Board draft International Financial Reporting Standard for Small and Medium-sized Entities. Sir David Tweedie, an ICAS member, is the chairman of the international board.

The draft is designed to provide a simplified set of accounting principles that are appro-priate for smaller, non-listed companies, but based on full International Financial Reporting Standards, which are designed primarily for listed companies.

It has taken the IASB sweat, tears and a few tantrums to arrive at this stage amid much cajoling from the worldwide accountancy profession. Here in the UK, the document raises many questions.

The most obvious question is this: is the document suitable as a basis for preparing the accounts of smaller entities?

Although the requirements of the proposed standard are considerably less onerous than full IFRS, the requirements, including disclosures, still dwarf those contained in the UK small company standard known as the Financial Reporting Standard for Smaller Entities.

As a result, the introduction of this standard would likely lead to increased compliance costs for these businesses at a time when the government is keen to be seen to reduce the regulatory burden.

Additionally, one has to question whether the users of accounts of this size of entity would require, or indeed welcome, such additional reporting requirements.

If the document is not suitable for smaller business, should the UK look to apply this document to the accounts of larger private owner-managed businesses? Convincing arguments can be made that where there is no divorce of ownership from control, then the standard would satisfy the reporting requirements of most of the stakeholders in these businesses.

This might include also subsidiaries of public companies, which are required to prepare and file accounts in the UK.

Thus the SME document might replace the dying UK accounting standards for this middle tier of companies.

These are not just issues for the boffins. That is why events such as this one are vital in establishing not just what the accountancy profession wants, but what business wants.

The audience at CA House will include many ICAS members who work in business as well as practice, and their views will be instrumental in shaping this debate. The motto of ICAS is "seek the truth". This may not be the topic of discussion at the event, but ICAS members are famed for their robust views and for advocating them fiercely. There can be little doubt that there is no better place for the UK's ASB to have chosen to start the UK debate on this subject.


James Barbour is director of accounting and auditing, the Institute of Chartered Accountants of Scotland