top stories

Comments from ACCA
July 2004

ACCA is pleased to have this opportunity to respond to the above exposure draft, which was discussed at a recent meeting of ACCA's Financial Reporting Committee. I am writing to give you their views which are set out as responses to the questions raised for comment in FRED30 and other matters.

Responses to ASB's Questions

Q1. Listed companies not preparing group accounts must apply the whole of FRED30

We would much prefer for such companies to be required to prepare IFRS accounts along with all other listed companies. We have asked the DTI to exercise the member state option to achieve this. Alternatively we think that ASB should state that such companies should use IFRS from 2005 and not UK standards. Failing this we agree they should have to comply fully with FRED30 and to that extent we welcome this change.

Q2. IAS32's disclosure requirements should apply to all (except FRSSE) companies?

These are potentially difficult disclosures to meet for many companies. We note that in principle most of them are going to be required by the fair value directive in any case.

ASB should consider some extension period before these significant new disclosures are made mandatory. Companies will have to provide comparative information on such matters as fair values and maximum credit risk for the 2005 accounts. From the Preface we note that a final version of the standard may await further changes from the IASB. This leaves little time, given also the concentration of attention on the transition to IFRS by listed companies and the lack of attention as yet on this major extension of disclosures to unlisted companies.

Q3. Should there be any other exemptions from the disclosure requirements?

No.

Q4. Retention of certain parts of FRS4 Capital instruments for those companies not applying IAS39

We do not agree, as we think that these provisions should be incorporated into FRED30. Indeed we still consider that it is unfortunate that the ASB intend to leave the accounting for financial instruments in the UK with in effect only an optional standard on recognition and measurement. We set out our concerns in our original response to FRED30 and believe they still apply.

Other Matters

ASB appears to have made a significant change in FRED30 by no longer having a special way of treating cash flow hedges. We are surprised from a due process perspective that this has not been the subject of a question for comment. We, however, agree with the change. The balance sheet treatment of the deferred gain or loss previously envisaged now looks difficult to sustain.

We consider that the derecognition sections of IAS39 should be included in FRED30. IAS39 has been altered since FRED30 was first issued. Applying ASB's own criteria from its recent document on convergence, there is no evidence that its treatment of derecognition of financial instruments is markedly superior to IAS39 and there is no immediate prospect of a change inIAS39 in this respect. Therefore convergence should take effect. Given the way FRS5 is structured, it can remain in place. While ceding financial instruments to the more specific standard, it can continue to deal with derecognition of items other than financial instruments. This would appear to meet ASB's main concern.

On page 58 the treatment of paragraph 94(a) looks wrong. Either the disclosures of FRS5 should remain in place in which case this whole paragraph is not needed. Alternatively these disclosures need to be reinstated and the references to IAS39 need to be altered.

Back to top