Scots ICA holds to UK standards

The Accounting Standards Board should take a stronger stance on UK accounting standards, where it believes these are better than their international counterparts, says the Scots ICA.

In a bid to drum up support for its proposal, the institute is undertaking a nationwide survey of the UK’s top 300 finance directors to find out where they stand on the issue of adopting international accounting standards.

Lesley Drummond, assistant technical director of accounting and auditing at the institute, said: ‘The ASB should play an important role in setting standards in the UK and not just rubber-stamp international accounting standards.’

The Scots’ move has opened up the debate about the future of UK accounting standards, which are increasingly under pressure to conform to a tide of international standards issued by the International Accounting Standards Board.

Drummond said the ASB should be able to concentrate on the key issues, such as pensions, deferred tax and goodwill, and decide whether to fall into line with international standards or go its own way.

She added that the ASB should adopt the international approach where UK and international standards are essentially the same, rather than get bogged down in ASB projects.

The Scots have identified three circumstances in which UK standards are out of line with international practice. Where the UK is leading the field with a standard it should lobby the IASC to follow suit. Conversely, where international standards are ahead, the UK should fall into line. And finally, where standards are different or developing in different directions, but where there are good reasons for this, the ASB should retain the UK approach.

ANDERSENS CALLS FOR ASB RETHINK ON GOODWILL

Arthur Andersen has urged the Accounting Standards Board to rethink its current proposals on goodwill and intangible assets, if it wants to avoid confusing users and frustrating analysts.

Chris Nunn, head of the professional standards group at Arthur Andersen, said: ‘If the ASB goes down the route it is proposing on goodwill in two or three years’ time, the world may wonder whether it came up with the right solution.’

He said that under the proposals in FRED 12, Goodwill and Intangible Assets, a large asset will suddenly appear in the balance sheet and arbitrary charges will often go to the income statement.

While analysts will disregard the goodwill entries as irrelevant, other users won’t be able to distinguish capitalised goodwill from conventional assets, and will get a false picture of the asset base, Nunn added.

Nunn said he believed that the financial community may be in for some future accounting shocks, as incoming management teams take a new broom to existing goodwill valuation policies, resulting in arbitrary write-offs to the profit & loss account.

Andersens favours the alternative proposal in FRED 12, with goodwill being parked in a separate reserve within shareholders’ interest and recycled through the profit & loss account if impaired.