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June 27 — Several leading accounting organizations stressed the need for continuing international collaboration amid the economic and political turmoil surrounding the U.K.’s referendum to leave the European Union.
“There is a lot that we just don't know yet,” U.K. Financial Reporting Council (FRC) spokesman Peter Timberlake told Bloomberg BNA in a June 27 e-mail response to questions on the U.K.’s vote to exit the EU, known as Brexit.
FRC—which sets U.K. and Irish accounting, auditing and actuarial standards—said in a June 24 statement that its regulatory framework is unchanged and that the council would continue to apply it.
“The FRC will also continue to play its part in representing the interests of the U.K. internationally,” the statement said.
Other accounting groups also emphasized their commitments to international cooperation.
The Institute of Chartered Accountants in England and Wales (ICAEW) will continue its partnerships with EU governments and regulators and with European professional organizations, chief executive officer Michael Izza said in a June 24 blog post on the ICAEW web site.
The institute operates a European Regional Office in Brussels.
Similarly, the International Federation of Accountants (IFAC) called for continuing global cooperation and coordination to ensure development of quality accounting standards as the U.K., Europe and other part of the world grapple with uncertainty.
“The accountancy profession will have an important role to play in the myriad issues that will need to be addressed,” IFAC CEO Fayezul Choudhury said in a June 24 statement.
Among the uncertainties the U.K. accounting profession faces in Brexit is the fate of EU directives already transposed into U.K. law—which the U.K. Parliament could overturn once Brexit takes effect—and what action, if any, the U.K. will take on future EU policies.
The U.K., for instance, recently put into effect the EU Audit Regulation and Directive, which introduced new requirements for statutory audits (12 APPR 13, 7/1/16).
“Parliament and the government will have to decide which parts of legislation will be discarded, and it can't be assumed that every piece of legislation will be overturned,” Timberlake said.
The U.K. government, he said, isn't at the point to make these decisions.
Current EU legislation and regulations remain in force until the U.K. Parliament amends or repeals them, Izza said.
How the U.K. would handle policies currently working their way through the EU system, such as the directive on shareholder rights, remains in doubt as well.
The U.K.’s course of action is unclear if EU policymakers approve directives that must be incorporated into member nations' laws, “although logic would suggest the U.K. may choose not to adopt,” Timberlake said.
Further, FRC's role in EU accounting and auditing policy could come into question.
FRC is one of eight national organizations in the 16-member general assembly of the European Financial Reporting Advisory Group (EFRAG), a sounding board on international financial reporting standards funded in part by FRC and the European Commission.
The council also works with:
“Clearly, U.K. regulator and other institutions' involvement with European groups will come under the spotlight and we may well cease to be represented,” Timberlake said.
No decisions are imminent, Timberlake and Izza said.
The U.K. referendum isn't binding, and Article 50 of the Treaty on European Union enabling EU member nations to withdraw won't be triggered until the U.K. government signals its intention to leave the EU.
This could occur in September or October 2016 following a vote by the U.K. Conservative Party to elect a new leader to replace Prime Minister David Cameron, who resigned soon after the referendum results were announced.
Cameron led the campaign to keep the U.K. in the EU.
Brexit could take two years to negotiate, Izza said, and until then the U.K. will remain part of the EU.
“It's so early in the process, and the approach will be driven as much by U.K. government decisions as by the EU and others,” Timberlake said.
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