Upon our official EU exit in March 2019, the UK will still need to sustain uniformity on audit regulation in order to allow for regulatory cooperation with the EU: this will demand both the UK and the EU to compare company accounts across jurisdictions; it will require a formal International Financial Reporting Standard endorsement process.
With this in mind and the UK’s departure from the EU a mere five months away, the Financial Reporting Council and the Department for Business, Energy and Industrial Strategy have come together to create a board to endorse revised IFRS reporting standards.
According to the FRC’s annual review of corporate governance and reporting 2017/18, a raft of existing EU legislation will need to be transposed into UK law to prevent uncertainty. Of these, the text of the EU adopted IFRS will be included which are applied in the UK “by listed companies under existing law, AIM companies under market rules and voluntarily by some other companies.”
On 29 March next year, Britain will become what EU treaties define as a “third country”. Under existing EU rules, holding companies of third countries that list equity on EU markets must either prepare their company accounts according to the IFRS or a standard that is determined as equivalent by the European Commission. Further to this, all third countries listing securities must be audited by EU statutory auditors and, unless the third country is deemed equivalent, the audits themselves will have to undergo inspection.
In a meeting that took place in September 2018, it was agreed by the Corporate Reporting Council that the UK IFRS Endorsement Board ‘would sit within the FRC’. Further to this, the CRC stated the careful consideration of ‘matters such as resourcing and appointments process’ was currently taking place.
“ According to the FRC, ‘the precise form of this process is being developed by the government in consultation with regulators, partner bodies and industry stakeholders.’ It will also be subject to parliamentary scrutiny. ‘The FRC is working in partnership with BEIS to create a UK IFRS endorsement board which will be responsible for assessing new and revised IFRS for consistency with certain prescribed criteria. It is expected that the FRC will provide oversight of the governance of the endorsement board and its compliance with due process.’”
James Bunney, Accountancy Daily