To ask Her Majesty's Government further to the Written Answer by Lord Henley on 20
February (HL5467), whether the Financial Reporting Council changed the wording after
my question (HL4627) was tabled on 11 January; and why the Written Answer by Lord
Henley on 1 February (HL5095) referred to a position with future effect, not the past
and present position.
<p>The fact sheet <ins class="ministerial">attached to the</ins> <del class="ministerial">placed
into the Libraries of the House in</del> response <ins class="ministerial">given</ins>
to question HL5095 used the word “requested” and is dated June 2017.</p><p> </p><p>My
answer to question HL5095 stated the position as of 1<sup>st</sup> February 2018.</p>
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>
To ask Her Majesty's Government when the Financial Reporting Council (FRC) first became
aware of any problems with International Accounting Standards for the capital adequacy
of particular banks; by what means the FRC found out about such problems; which banks
any such problems applied to; and how the FRC responded to any identified problems.
<p>The Prudential Regulation Authority is responsible for regulation of the capital
adequacy of banks. Prior to 2013 this was the responsibility of the Financial Services
Authority. The Financial Reporting Council (FRC) was not aware of the contribution
that certain features of the International Accounting Standards made to the problem
of the capital adequacy of the banks until the problem was a matter of public knowledge.
The FRC has engaged with UK Government, Europe, internationally, and with the International
Accounting Standards Board since then to develop reforms to the standards, which address
the concerns that have been identified.</p>
To ask Her Majesty's Government, further to the Written Answer by Lord Henley on 12
February (HL5214), on which issues does the Financial Reporting Council now accept
the position set out by Mr Bompas QC; and in particular whether section 831 of the
Companies Act 2006 is one such issue.
<p>As stated in the reply given to the noble Baroness on 12<sup>th</sup> February
2018 to question HL5214, the Financial Reporting Council (FRC) sought advice on a
range of matters from Martin Moore QC and accepted the advice it received. This includes
the advice relating to the requirements of the Companies Act 2006 that determines
distributable profits. Section 831 forms part of those requirements. The FRC has not
changed its views on those matters.</p>