Press Room.
echnology Companies Should Prepare for Proposed Replacement of
UK Accounting Standards, Says Grant Thornton
Leading business and financial adviser
Grant Thornton, welcomes the Accounting Standard Board’s
(ASB’s) proposal to replace UK GAAP with the
IFRS for SMEs, but says that requiring change from
1 January 2012 will not give many technology companies
sufficient time to prepare.
Technology related businesses that currently use UK GAAP
will be directly affected by the ASB's proposals to replace
UK accounting standards with those internationally
recognised. Its current consultation on the future of UK GAAP,
which closed on 1 February 2010, would achieve that aim
by adopting IFRS for SMEs into UK GAAP.
The immediate attraction of a set of internationally recognised
accounting standards is the improved cross-border comparability and
comprehension of financial reports, theoretically leading to
increased access to finance. However, the proposed standard removes
accounting policy choices, limiting comparability with listed
companies that follow full International Financial Reporting
Standards (IFRS). In addition companies will need to assess the
impact of transition including the cost of systems changes and
training.
Technology companies which currently capitalise their
development costs will be directly hit by the requirement to write
off this expense. These businesses will need to report a reduction
in their net asset position and will find that their profitability
may be lower during the development stage, affecting the perception
of the performance of the company and therefore their ability to
raise finance and obtain supplier credit. However, where costs
don't qualify for R&D tax credits, this could lead to obtaining
tax relief earlier.
Alison Seekings, partner in the firm's Technology sector, says :
“The impact of a complete change to the accounting framework will
extend beyond the preparation of the financial statements.
Many technology businesses remain unconcerned but management will
need time to consider how IFRS for SMEs affects such elements of
their business as tax bills, bank covenants and bonus arrangements
in addition to the one-off cost of conversion.”
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ENDS-
For further information, please contact: Stephanie Aneto, Grant
Thornton Press Office: on 020 7728 2940 or stephanie.aneto@gtuk.com