The Accounting Standards Board's draft UITF abstract on obligations in capital instruments has attracted mixed responses from the profession. Both Deloitte & Touche and the Scottish Institute expressed serious concerns over the abstract. And Deloittes went so far as to say that it was 'seriously flawed', 'should be withdrawn', and would, in its present form, 'damage UK GAAP'.
D&T and ICAS agreed that the draft abstract conflicted with
FRS 4, Capital Instruments, FRS 12, Provisions, Contingent Liabilities and Contingent Assets and the ASB's Statement of Principles. D&T also claimed that it contradicted FRS 5, Reporting the Substance of Transactions.The ACCA, Andersen, KPMG and the ICAEW, on the other hand, all wrote in support of the abstract. KPMG described it as 'appropriate and pragmatic'. The firm would only make 'one substantive change, in relation to minority interest shares'.
Andersen said it was aware that the proposals might be criticised by others, but stressed that 'an inability to solve all problems does not justify inaction'. The firm added that the proposed abstract would help 'eliminate inconsistent reporting practices for complex capital instruments, which have characteristics of both debt and equity'.