The Board is proposing a three-tier approach to developing UK and Irish GAAP converged with IFRSs as follows:

• Tier 1 – publicly accountable entities would apply IFRSs as adopted by the EU.
• Tier 2 – all other UK entities, except those that elect to apply the Financial Reporting Standard for Smaller Entities (FRSSE), would apply the IFRS for SMEs.
• Tier 3 – small entities could choose to continue to apply the FRSSE if they do not exceed two or more of the following criteria: turnover £6,500,000; balance sheet total £3,260,000; and average number of employees 50.

Entities in Tier 2 and Tier 3 would have the option of using EU-adopted IFRSs if they wished, and those in Tier 3 would have the option of using the IFRS for SMEs. The ASB has been working with the UK Department for Business Innovation and Skills (BIS) in developing these proposals. The proposals envisage a reporting regime based on public accountability, broadly in line with the IASB's definition in the IFRS for SMEs, which states that entities do have public accountability if they (a) trade their debt or equity instruments in a public market or (b) hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses. The consultation paper explores whether constituents would prefer to retain the current legal definition of public accountability. This would imply, for example, that all large entities are publicly accountable, and so should be required to follow EU adopted IFRSs. The paper also sets out what the Board sees as the impact of its proposals for public-benefit entities.

Announcing the issue of the consultation paper, Ian Mackintosh, Chairman of the ASB, said 'For a number of years, the Board has stated that, in the medium term, there is no case for the use of two different accounting frameworks in the UK. The recent publication by the IASB of its IFRS for SMEs provides the Board with the opportunity to consult on what we see as the future framework for financial reporting by UK and Irish entities. I would urge all interested parties to consider the proposals and let us have their views'.

The ASB is seeking comments on the proposals by 1 February 2010. If the proposal is adopted, the 'change' date is planned for financial years beginning on or after 1 January 2012. Click to Download the Consultation Paper (PDF 492k).