ICAEW Appreciates Accounting Council for Not Mandating Fair Value Accounting
The Accounting Council of the United Kingdom Financial Reporting Council has been praised by Institute of Charted Accountants in England and Wales for taking the decision of not mandating fair value accounting procedure for each and every farmer for livestock and crops.
ICAEW stated that as far as ‘biological assets’ are concerned, fair value accounting procedure, which would be available on a free will basis, is definitely good for few farmers and would have unnecessarily distracted other farmers.
The fair value accounting procedure that is used for measuring assets as per their existing market value is compulsory for the biological assets of entities that follow International Financial Reporting Standards.
ICAEW was fearful that fair value accounting could have been made mandatory for almost all the United Kingdom farms, since UK’s accounting procedure is likely to witness a number of changes very soon. ICAEW is of the impression that the fair value accounting process offers meaningful and important information about certain businesses that deal with farming. However, ICAEW also feels that the process would have resulted in imposing unreasonable costs on other businesses.
The head of Financial Reporting Faculty of ICAEW, Nigel Sleigh-Johnson stated that they support the decision taken by the Accounting Council. He also mentioned that there are several reasons behind a farm’s decision around reporting fair value figures. According to Johnson, this will allow them to offer useful information regarding their business. Johnson, however, is not in favor of making it mandatory for the entire ‘biological assets.
On the other hand, the chairman of the Farming and Rural Business Group, Robert Wharton was of the opinion that this news will be appreciated by the farmers of United Kingdom as well as their financial accounts preparers. He further clarified that in case they were pressurized for measuring it each year, then it would have been unequal, confusing and expensive for the farmers who run small farms.
In association with other representatives of the industry, ICAEW has made every effort to explain to the Accounting Standards Board as well as their successor regarding the need for change in this particular area of accounting.