To ask Her Majesty's Government, further to the Written Answer by Lord Henley on 12
February (HL5280), what were the circumstances that led to the UK voluntarily adopting
International Accounting Standards (IAS) for separate, company-only, accounts by invoking
the option under Article 5 of the IAS Regulation 2001; and whether, prior to the UK
invoking that option, the Financial Reporting Council or Department for Trade and
Industry had anticipated the difficulties that this option would create for the use
of separate accounts for capital maintenance purposes.
<p>The Department for Trade and Industry consulted on the adoption of “International
Accounting Standards” in 2002 (URN 2002/1158). The consultation considered whether
the UK should exercise the Member State option under Article 5 of the IAS Regulation
and, in particular, whether to extend the application of the Regulation to the individual
accounts of publicly traded companies.</p><p> </p><p>The consultation stated that:</p><p>
</p><p>“There may be good reasons to exercise this option in order to help internal
consistency and comparability of accounts within the same group and assist in preparation
of consolidated accounts. There is the additional advantage that the current practice
of presenting entity financial statements of the parent with the group accounts as
one package could continue. With no extension the practice would probably have to
change, as it would be cumbersome and confusing to have to explain two different bases
of preparation. We estimate that this would affect around 2700 companies.”</p><p>
</p><p>The Government considered the responses to the consultation and conducted a
full assessment of the costs and benefits of the various approaches to implement the
IAS Regulation. Following this consideration the Government concluded that it would
implement the option in the regulation, including to extend the application of the
Regulation to the individual accounts of publicly traded companies.</p><p> </p><p>The
Companies Act 1985 (International Accounting Standards and Other Accounting Amendments)
Regulations 2004 (SI 2004 / 2947) provided for the application of the International
Accounting Standards Regulation. The impact assessment accompanying the regulations
sets out the Government’s assessment of the costs and benefits. It concluded that
the Governments resulting policy on taking up the option in Article 5 overall had
the following benefits:</p><p> </p><p>“Parent companies and building societies and
subsidiaries in groups will be able to prepare their accounts to one framework of
accounting standards. Companies and building societies that do business or seek capital
across borders would be able to prepare their accounts to adopted IAS for ease of
comparison. Comparability of accounts will assist, shareholders, analysts and other
users of accounts.”</p>
