UK endorsement of IFRSs post EU-exit

  • IFASS (International Forum of Accounting Standard Setters) (dark green) Image
  • United Kingdom Image

01 Oct 2019

At the meeting of the International Forum of Accounting Standard Setters (IFASS) currently held in London, participants received a presentation by representatives of the UK Department for Business, Energy & Industrial Strategy (BEIS) on 'UK audit reforms; and UK endorsement of IFRSs post EU-exit'.

The main messages on the IFRS-related aspects of the presentation were the following:

  • It is in the UK's own interest to stay with IFRSs.
  • After Brexit, IFRSs in the UK will be known as "UK-adopted international accounting standards".
  • There is legislation already in place that will
    • onshore and freeze existing EU-adopted IFRSs on the date of the EU exit;
    • transfer the European Commission's powers to endorse and adopt IFRSs to the Secretary of State; and
    • set out a mechanism for these powers to be sub-delegated to an endorsement and adoption board (currently expected to occur in the new year).
  • The new endorsement board will
    • be hosted by the UK Financial Reporting Council (FRC) but will be sufficiently independent;
    • consist of a full-time Chair, part-time Board members and 12-15 staff; and
    • will also be responsible for upward influence of the pronouncements to be endorsed (for example, submitting comment letters to the IASB).
  • The FRC, the current standard-setter,
    • will eventually be replaced by a new body, the Audit, Reporting and Governance Authority (ARGA);
    • has just recently been given a new leadership;
    • will continue to be responsible for UK GAAP; and
    • will continue to be responsible for the strategic report and, therefore, application guidance on non-financial reporting requirements.

The legislation that is already in place includes the Statutory Instrument (SI) 2019/685, which comes into effect on the day of EU exit, transfers the endorsement powers of the European Commission to the Secretary of State for BEIS. Regulation 7 sets out the endorsement criteria, which are almost identical to the criteria in the IAS Regulation. The SI can be downloaded here. Please note that only article 2 of the IAS Regulation was transferred into UK law unchanged - the definition of IFRSs. All other aspects saw slight adaptations, for example the reference to the European public good.

The SI also has an explanatory memorandum, which is available here.

All legislation refers to the "date of the UK withdrawal from the EU". There is no fixed date mentioned.

Following questions from the audience, two aspects were clarified:

  • The UK withdrawal act limited the UK options for endorsement to what is currently EU law. Therefore, there is the option for "carve-outs" but there is no option for "carve-ins".
  • Endorsement of the recently issued IBOR amendments is on the radar of the BEIS. Endorsement of the amendments will in all likelihood be handled by the Secretary of State and will be swift.

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