Under the EU's IAS Regulation, companies and building societies with securities traded on an EU regulated market will be required to use IAS in their consolidated accounts for financial years commencing on or after 1st January 2005.
The draft regulations – the Companies Act 1985 (International Accounting Standards and Other Accounting Amendments) Regulations 2004 and the Building Societies Act 1986 (International Accounting Standards and Other Accounting Amendments) Order 2004 – extend the application of the IAS Regulation to all other companies and building societies on a voluntary basis.
This will allow companies and building societies to choose to use adopted IAS in their individual and/or consolidated accounts. If taken up, it is expected to improve the transparency, comparability and quality of financial reporting across the EU and so lead to a strengthening and deepening of the EU's capital markets.
It is expected that by 2005 over 90 countries will be using IAS as part of their financial reporting framework, according to the Department for Trade and Industry.
The DTI's draft regulations also implement the provisions of the Accounts Modernisation and Fair Value Directives for companies. The Modernisation Directive brings EU accounting requirements into line with modern accounting practices consistent with IAS, while the Fair Value Directive enables companies to follow modern, more transparent accounting practices in the area of financial instruments that are consistent with IAS.
HM Treasury will lay separate draft regulations implementing the same Directives for building societies shortly.
But with UK listed companies due to implement the IAS Regulation by 1st January next year, confusion reigns over one specific standard, namely IAS 39 'Financial Instruments: Recognition and Measurement'. The confusion follows an EU vote in October to adopt a version of the standard that is slightly different from that published by the International Accounting Standards Board.
Speaking yesterday, the UK's Accounting Standards Board urged all UK companies to comply with the earlier provisions of the standard and not the amended version, and promised to issue guidance on the matter as soon as possible.