Andrew Howie is the managing partner of Grant Thornton in Scotland and has been with the firm since 2005. During his career with Grant Thornton he has worked within Assurance and now heads up the Audit practice. Andrew acts for some of the largest privately held business in Scotland and his client base covers a wide variety of sectors including property and construction, food and drink, and AIM. Since joining the firm, he’s also been responsible for business development in Scotland.
A frequent criticism of the International Financial Reporting Standards (IFRS) approach to accounting standards is that it is too theoretical. What is your view?
There is no doubt that the thrust of IFRS is complicating accounting for companies and making it more complex and more detailed. For the ordinary man in the street, it is making company accounts less easy to understand. The bottom line is that it is costing businesses more money to produce accounts than it used to, and this additional spend is not necessarily generating more clarity. So why are we doing it? This question is very difficult to answer and it is one we hear a lot from clients.
For some of the large, complex businesses there are arguments that IFRS will help such businesses to achieve greater clarity in their financial reporting. There are arguments too that it will force them to provide more disclosure, which might aid the more sophisticated user of accounts. But for smaller, mid-market quoted companies it could be argued that IFRS does not really add anything to the financial statements.
Moreover, the scope and reach of IFRS are being extended. The project has now been going for some time, and when it started it was applicable only to companies listed on the main market of the London Stock Exchange. Then, in 2007, it was extended to companies listed on the Alternative Investment Market (AIM). The next proposal is to implement a more watered-down version of IFRS for all UK companies apart from the very smallest entities. This is likely to become mandatory within the next two to three years and will generate costs for businesses that in the current economic climate they will definitely not wish to bear.
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