Matt Blake- Commissioners’ Advisory Accountant (MB) HMRC
Allana Sheil - CT & VAT(AS) HMRC
John Harnedy (JH) HMT
Richard Martin (RM) ACCA
Lakshmi Narain (LN) CIOT
Phillip Gillet (PG) ICI
James Barbour (JB) ICAS
Ian Young (IY) ICEAW
Andrew Lennard (AL) ASB
Chas Roy-Chowdhury ACCA, Ian Menzies-Conacher CBI, Frank Haskew ICAEW, Josephine Crimmin HMRC, Simon Woodside HMRC, Nick Houghton HMRC, Aiden Lambe ICAI, Michelle Telford HMRC, John Cullinane CIOT.
The minutes had already been agreed. They would be posted on the Consultative Forums website when it was updated.
LN asked for an update on Mars and Grant. AS said she was still interested to hear any comments - see below. Guidance would be published in the Business Income Manual at the end of July.
MB noted that the Forward Look schedule had been updated following his meeting with the professional bodies looking at reporting standards -RM had been to this meeting.
IFRS SMEs/Future UK GAAP
These issues were different but linked so were discussed in tandem.
It was agreed that the consultation paper IASB Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities would be of great interest if it were to become an option for the UK. The issue of what would be the appropriate GAAP for the smallest companies if the draft was adopted and subsequently became part of converged GAAP was discussed.
AL outlined some of the views that were currently emerging from Europe, EFRAG, IASB etc on IFRS for smaller entities. It was noted that S50 (3) FA 04 did not require that a company use full IFRS but only that which had been adopted within the EU. Currently there were few differences but that might change in time.
[At this point Ian Young joined the meeting]
The group discussed the possible problems of adopting the IFRS for SMEs in Europe under the existing regulations. It was agreed that frequent amendments to the 4th Directive made the situation increasingly more complicated. He was in favour of the project continuing and that it might be appropriate to replace UK GAAP with it for unlisted companies.
The question of the DTI’s (now DBERR) role was also discussed. AL commented that it was the ASB that would have to decide what standards would apply to smaller companies. The group came to a general view that the draft IFRS for SMEs might not be appropriate for smaller companies.
RM commented on the Simplification document - simplification of accounting
rules for small and medium-sized companies – discussion of possible
amendments to the 4th and 7th Company Law Directives. It clearly mapped
out the possibility that micro enterprises might be taken out of the 4th
and 7th Directives entirely. The question of different options for different
member states was discussed but it seemed unlikely that a member state
could opt to 'gold plate' an EU directive. Because of the implications
for the P&L account it was agreed that the group would need to keep
the situation under review. LN raised the issue of disclosures and CTSA
tax returns – if simplification required less information in the
accounts how might that effect the penalty position? The group discussed
how simplification might affect transactions with related parties and
the information that HMRC would expect to find in returns post simplification.
The question of HMRC being the only user of a set of accounts was also
mentioned – did the standard setters consider this? It was noted
that tax authorities were the biggest users of accounts world wide but
AL commented that the fact that the standards were used for tax purposes
was only one among several. However HMRC could engage in the process to
ensue that its needs were met.
There was further discussion on the proper role of standards and standard
setters, the increasing subjectivity now required in producing accounts,
and finally materiality and mistakes in accounts if the simplification
project were to proceed.
Other Hot topics refer to Forward Look schedule for more detail)
UK
IFRS
To add to list
AS said that the above group had met recently to discuss the accounting implications of IFRIC 12. They were happy that the accounting issues of the Contact Group be brought under the umbrella of the Accounting and Tax Group as a sub group. RM asked Al what the ASB’s stance on IFRIC 12 was – he said that this would be an issue for convergence only.
The hedging and forex matching sub-group met in June to consider proposals put forward by HMRC for changes to the Disregard Regulations in general and to forex matching in particular, to be linked to the repeal of section 84A FA96 and paragraph 16 Schedule 26 FA 2002. The key points of the proposals were: matching of eligible investments in foreign operations with net liabilities in the same currency to be mandatory; companies to be able to elect to match net asset value of investments, rather than cost; all designated cash flow hedges to be taxed on the basis of amounts credited or debited to P&L. The group felt that these major changes should not be introduced until next year, to allow companies to plan accordingly; but HMRC would draft changes to regulations along these lines, and consult the IAS 39 Working Group on the draft later this year. In the meantime, it was desirable to make minor changes to regulation 4A of the Disregard Regulations, to take effect this year.
A further tranche of updates to the Corporate Finance Manual was published in July, including substantial new chapters on hybrid securities and securitisation. A further batch of material, including updated guidance on matching and on functional currency, is expected to be published in August or early September.
None.
