Matt Blake - Commissioners’ Advisory Accountant (MB) HMRC
Allana Sheil - CT & VAT (AS) HMRC
Nick Houghton - (NH) HMRC
Nic Clarke - (NC) HMRC
John Harnedy - (JH) HMT
Richard Martin - (RM) ACCA
Chas Roy-Chowdhury - (CRC) ACCA
John Cullinane - (JC) CIOT
James Barbour - (JB) ICAS
Andrew Lennard - (AL) ASB
Frank Haskew - (FH) ICAEW
Mark Kenny - (MK) ICAI
Steve Dale - (SD) of BAT Lge Crpts
Lakshmi Narain CIOT, Ian Menzies-Conacher CBI, Michelle Telford HMRC, Phillip Gillet ICI
The meeting planned for October had been postponed because of illness and post Pre Budget Report (PBR) commitments.
Introductions were made since there were a number of first-time attendees
present.
It was agreed that it would be useful if the accounting specialists of
the various professional bodies attended but it was up to each individual
body whether both the accounting and tax specialist came to each meeting.
The list of bodies and industry reps should remain as agreed last year
but other bodies could be brought into an appropriate sub group to cover
matters of particular interest to that body.
AS gave the following report of the latest HM Revenue & Customs (HMRC) activities on IAS 39 that had previously been covered by the sub group. The working party was no longer active but it was agreed that an HMRC report would still be useful.
A number of sets of regulations were made in December 2007; all dealing with IAS related matters.
The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment No. 2) Regulations 2007 (SI2007/3431) amend the Disregard Regulations to allow elections for forex differences arising on derivatives matching shares to be matched by reference to the underlying net asset value rather than cost.
The Taxation of Securitisation Companies (Amendment) Regulations 2007 (SI2007/3339) make a number of technical changes to the Taxation of Securitisation Companies Regulations 2006 (SI 2006/3296).
The Securitisation Companies (Application of Section 83(1) of the Finance Act 2005: Accounting Standards) Regulations 2007(SI2007/3338) extend the application of section 83 FA 05 - the ‘interim regime’ which deals with the taxation of securitisation companies existing before 2007 which do not fall into the permanent rules set out in the 2006 regulations.
The Taxation of Insurance Securitisation Companies Regulations 2007(SI2007/3402) extend the application of the securitisation regime to insurance securitisations. The Taxation of Securitisation Companies (Amendment No. 2) Regulations 2007 (SI2007/3401) make some consequential amendments to the 2006 regulations.
The Loan Relationships and Derivative Contracts (Change of Accounting Practice) (Amendment) (No. 2) Regulations 2007 (SI2007/3432) amend the change of accounting practice rules which apply to the spreading of debits and credits on dormant bank and building society accounts to bring in 3/10 in 2008 and 1/10 p.a. thereafter.
CRC asked questions on the write down on impaired sub primes and securitisations.
The group went through the items on the Commissioners’ Advisory Accountant’s Forward Look that had been updated on 14 January and had been circulated before the meeting. The main items for discussion were as follows:
It was agreed that take up was still low, as indeed it was for IAS in general, although certain sectors, for example local authorities, were now moving onto IAS.
The write off of acquisition costs at the individual entity level as well as at consolidated level was discussed, although it was suggested that this had also been an available option under the previous version. The treatment of revaluations and when it was correct to put such revaluations to the P&L was also debated. It was noted that some of the changes were controversial in Europe.
The progress to future endorsement of this IFRIC by the EU was again discussed.
Mooted changes to IFRS 1 and IAS 27 might encourage further adoption. However the group did not consider eg IAS 27 the only bar to adoption – there might be concerns on the tax treatment of certain transactions. However it was agreed that the tax treatment was now less of an issue than in 2005. It was also possible that companies were now used to running parallel accounting – something that would have been most unappealing a couple of years ago.
The question of 'book keeping' and what debits and credits do actually hit the P&L was again touched on. The issue of record keeping requirements to allow the correct calculation of depreciation (as noted in the recent CIOT letter and by AL) was also discussed.
AS reported on the progress of the programme of making consequential amendments to the Taxes Acts required by the CA.
Iit was thought that businesses with a large volume of 'non financial liabilities' may actually be least effected by the proposed changes. Those with a single large item might be more affected.
The three (or possibly four) tier approach was discussed and the likely future role of the Financial Reporting Standard for Smaller Entities (FRSSE). There were different issues for companies at the top and bottom end of the range – for a very large company it was questionable if UK GAAP, rather than International Financial Reporting Standard (IFRS), was still acceptable and for very small businesses the need for ‘true and fair’ accounts was still an issue. There was discussion on the EU proposals for micro entities and how Department for Business Enterprise and Regulatory Reform (BERR) and other UK stake holders might respond.
These schemes were discussed together with the Carbon Reduction Commitment (CRC) scheme. Trading schemes were to go on the International Accounting Standards Board (IASB) agenda but not the associated government grants side to the topic. It was agreed that there was currently no clear accounting consensus – MB noted that this would begin to cause problems for HMRC since the Department would not be able to give clear advice on the tax implications of the schemes.
MB asked for contributions to the thinking on this topic.
Nothing of note since last meeting.
This was definitely of interest to the group but over a longer time scale.
There was debate on the advertising point. In addition the IAS 16 improvement was discussed - the possible distinction between assets and inventory, and the revaluation of investment property under construction.
It was agreed that this was unlikely to be a formal consultation. Issues around realised and unrealised profits were discussed.
Non controversial.
There were no other Hot Topics listed so the group was asked if it had any other items to add - RM mentioned customer loyalty programmes and IFRIC 23.
There was a wide ranging discussion on accounting for royalty income in respect of past periods in the context of FRS5 Application Note G or UITF 40, and also more generally – MB noted that in some professions, for example those of authors and musicians, he was seeing reported profit that did not appear to reflect earnings of a particular past period but that was computed in seemingly in accordance with cash receipts of a period. HMRC would be interested to hear any comments that the professional bodies’ members might have on this subject – both on what the appropriate accounting ought to be and on what was happening in practice – and to be advised of any contacts with industry bodies or specialists of which the professional bodies might be aware.
Dates for the next meetings were discussed. Meetings would continue quarterly on a date as near to the last Thursday of the month as possible. It was agreed that in future the meetings would run from 10.15 to 12.15 to avoid congestion at 100 Parliament Street.
