Wednesday, April 20, 2011

SME Feedback Does Not Reflect Accounting Standard Concerns

The SME feedback is said not to contain the housing association’s concern about the dangers of switching to international financial reporting standards.

Chairman of the Accounting Standards Board or ASB, Roger Marshall, is quick to defend that such inconsistency means that there is a need for further discussions. He further revealed his plans of meeting up with the housing association trade bodies after the consultation closes on April 30.

The affordable home providers’ concern is that transferring to IFRS means 100 million Euros in red tape. Furthermore, they told the Financial Times that it could also wipe 1 billion Euros off the current value of assets.

Other concerns include property revaluation. According to the proposed IFRS for SME, this revaluation is not allowed. This has caused fear among landlords that their equity might be slashed which would eventually lead to problems with existing banking covenants.

Another concern presented by housing associations and companies connected to construction is the capitalization of borrowing costs. Companies with properties that are being developed were able to roll the cost of borrowing into the project under the UK GAAP which has kept their balance sheets healthier.

Marshall says that the ASB is still listening to all concerns and is going to take all into consideration. He said that his being a former housing association treasurer makes him fit to deal with relevant issues. He further stated that the ASB will wait for all concerns, responses, and issues to come before it moves on to the next step.

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