The Financial Statement Prepared Under UK GAAP and IFRS Comply with the EU and UK Laws
The United Kingdom Department for Business Innovation and Skills (BIS) has confirmed that the financial statements prepared under the UK Generally Accepted Accounting Principles (UK GAAP) and the International Financial Reporting Standards (IFRS) comply with the EU and UK laws. The UK Financial Reporting Council (FRC) has also confirmed these findings.
Under the Companies Act, the UK entities are required to prepare financial statements and accounts that present a true and fair view. Some of the observers showed their concern that applying IFRSs will not enable the financial statements to fulfill this legal requirement.
The BIS consulted legal experts and sought their independent opinion, and reached at the result that compliance with IFRS will result in a true and fair view. The FRC sought its own independent legal opinion and reached at the same result. The International Accounting Standard 1 (IAS 1) allows the entities to override an accounting standard if its implementation does not provide a true and fair view.
The FRC and the BIS are of the view that some improvement can be made to the Conceptual Framework and the IFRSs, but these changes are not necessary to enable the existing IFRSs to comply with the EU and UK laws. The FRC expressed its intention to continue working towards the improvements in the accounting standards. In this connection it expressed its intention to continue it contribution to the "comprehensive conceptual framework project" of the International Accounting Standards Board (IASB).
The BIS and the FRC are of the view that clear principles are needed to describe when specific approaches to measurement, such as fair value, should be used". They also believe that stewardship reporting should be included as a "primary objective of financial reporting" in the conceptual Framework. Furthermore they said that prudence should be explicitly mentioned in the financial statements. Despite these proposed improvements, the accounts still present a true and fair view if they are prepared under existing accounting standards.