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Comments from ACCA
July 2005

The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on the above exposure draft published by ASB which has been considered by ACCA’s Financial Reporting Committee.

Scope extension

We think that the proposed extension of scope of FRS26(IAS39) to all companies would be premature for the following reasons.

• FRS26 has only recently come into force with its original scope of application. It is a long and complex standard and there is relatively little track record yet on implementation issues of either the UK or the international version to act as guidance for UK unlisted companies.
  
  
• IASB, as noted in the Exposure Draft, are still amending IAS39 and any widespread UK implementation would be better incorporating these amendments.
  
  
• IASB are progressing their “SME” project whose scope is essentially all unlisted companies and therefore comprising all entities that would be affected by this ED. IASB have implicitly accepted by progressing with this project that full IFRS are not suitable for unlisted companies. It would be wrong to impose IAS39 on UK unlisted companies now when within two years IASB might possibly simplify or omit much of IAS39 from its “SME” standard.
  
  
• ASB are consulting on their own strategy and future roles, including their IFRS convergence plans. These in large measure depend on what future role is foreseen for UK GAAP and how it should develop. A number of questions of difference are not clear. Should UK GAAP in the future be distinct in any way from IFRS on the one hand and from the FRSSE on the other? The development of the IASB’s “SME” project is highly significant in this regard and should it be the future basis for UK GAAP? In all these questions of difference we consider that financial instruments is a case where, perhaps above all others, ASB might contemplate significant differences between the standards for listed companies and those for unlisted.

In our view, therefore, ASB should take no action on extending the scope of FRS26 until the overall destination of UK GAAP is clearer from ASB’s more general consultation on its future and the other developments at IASB.

Derecognition

We support the inclusion of the recognition and derecognition requirements from IAS39 into FRS26. If there is to be a UK version of IAS39 available for some companies then it should not be different from the original in this important area. The published restatements by UK companies to IFRS have made very clear the significant impact of the derecognition requirements on the balance sheets of some companies.

We agree with the suggested application from January 2007 which would allow for comparatives to be restated from January 2006.

Publication of the FRS26 amendments might be delayed so as to incorporate the other changes to IAS39 that are currently being processed by IASB.

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