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U.K. financial-report preparers and investors continue to favor adopting international financial reporting standards (IFRS) once the U.K. leaves the European Union, a spokesman for the U.K. Financial Reporting Council told Bloomberg BNA.
“That is what we are hearing still,” Peter Timberlake said in a March 28 email response to follow-up questions initially submitted to FRC in June 2016 after U.K. voters approved a referendum to split the nation from the EU.
The council establishes accounting, auditing and actuarial standards for the U.K. and the Republic of Ireland.
The U.K. on March 29 formally triggered the procedure to divorce the country from the EU, known as Brexit.
After the separation is complete—a process expected to take up to two years to finalize—the U.K. no longer will transpose into national law the IFRS that the EU approves and incorporates into legislation.
As a result, the U.K. either will have to choose an existing system for setting accounting standards or create a new one.
No U.K. industries in particular would feel Brexit’s impact on their accounting and auditing activities “unless we change the requirements, which we are not doing,” Timberlake said.
Brexit also wouldn’t change IFRS already adopted in the U.K., he said in June 2016, unless Parliament votes to amend or repeal particular standards.
“Parliament and the government will have to decide which parts of (EU) legislation will be discarded, and it can’t be assumed that every piece of legislation will be overturned,” Timberlake said last year.
FRC will continue to participate in European accounting and auditing bodies as the Brexit process moves ahead, according to Timberlake’s March 28 email.
This includes working with the Committee of European Auditing Oversight Bodies (CEAOB)—formerly known as the European Audit Inspection Group—and the European Financial Reporting Advisory Group (EFRAG), both of which collaborate with the European Commission.
The council contributes funding to EFRAG and serves on the group’s 16-member governing body, the General Assembly.
FRC’s roles in EFRAG and CEAOB once Brexit takes effect—including whether to continue providing financial support to EFRAG—still must be determined.
“Our participation after the UK leaves the EU will depend on the terms of Brexit,” Timberlake said.
FRC doesn’t plan to address any EU standards over the next two years as Brexit negotiations proceed, he said.
Any additional disclosure requirements for audits that the EU might adopt, for example, would be handled though the council’s international standards on audit (ISA).
“If further EU legislation required the inclusion of further information in an annual report, auditors will audit that in accordance with ISA (UK) 720,” Timberlake said.
Amid Brexit uncertainty over the next few years, FRC won’t sit back and simply watch events unfold, the council said in a February 2017 report on auditing.
Along with enhancing audit enforcement, “our proposed priorities also include playing an active role with other regulators in helping address the challenges and opportunities of Brexit and remaining influential internationally,” it said.
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