APB issues guidance on first-time use of IFRS

The Auditing Practices Board has published a draft Bulletin providing auditors with interim guidance on issues that may arise when companies (and other entities subject to audit) make the transition from UK generally accepted accounting practice to International Financial Reporting Standards.

Companies listed on a market regulated by the European Union must use IFRS when preparing consolidated financial statements for accounting periods beginning on or after 1 January 2005. At the same time as IFRSs are introduced, changes will also be made to UK law arising from the European Fair Value Directive and the Modernisation Directive. The APB warns that there is substantial complexity in the interaction of accounting standards, legal issues and auditing requirements.

'There are still uncertainties surrounding the introduction of IFRS in 2005, not least in relation to the accounting for financial instruments,' said Richard Fleck, APB chairman, when announcing the draft guidance.

'APB plans to finalise its guidance when these matters have been resolved.

It is clear, however, that the implementation of IFRS will present significant challenges to companies and their auditors. I hope that APB, by publishing draft guidance at this time, will assist companies and their auditors to better understand their responsibilities and thereby ease the transition to IFRS.'

Comments and suggested amendments to the draft Bulletin are requested by 31 October. The Bulletin may be downloaded from the APB's website at www.frc.org.uk.

The staff of the International Audit and Assurance Standards Board has also issued First Time Adoption of IFRSs - Guidance for Auditors on Reporting Issues. The guidance contains a series of questions and answers designed to help auditors address reporting issues. It is available from the International Federation of Accountants' website (www.ifac.org).

Financial Reporting, p85.