Differences between the UK and US Accounting Ethics Standards - Essay Example

The chief standard-setter is the Accounting Standards Board (ASB), which issues standards called Financial Reporting Standards (FRSs). The ASB is part of the Financial Reporting Council, an independent regulator funded by a levy on listed companies[1], and it replaced the Accounting Standards Committee (ASC), which was disbanded in 1990 following several criticisms of its work. To the extent that the ASCs pronouncements, known as Statements of Standard Accounting Practice (SSAPs), have not been replaced by FRSs, they remain in force. The ASB has a formal exposure process for proposed standards. Early concepts are issued as Discussion Papers. These are released to the public and comments are invited. Where a new standard is to be proposed, a Financial Reporting Exposure Draft (FRED) is released for comment. The standard in final form is only issued when comments have been incorporated or addressed.

This aims to address the criticisms leveled at the ASC, whose comment process was less rigorous. Issues that require an immediate solution are considered by the Urgent Issues Task Force (UITF). The UITF comprises several senior figures from industry and accounting firms. It meets as necessary to consider pressing issues and issues Abstracts which become binding immediately. The principal legislation governing reporting in the UK is laid down in the Companies Act 1985 (as amended by the Companies Act 1989 and subsequent statutory instruments), which incorporates the requirements of European law.

The Companies Act sets out certain minimum reporting requirements for companies and, for example, requires limited companies to file their accounts with the Registrar of Companies who makes them available to the general public. In 2005, this framework changed as a result of European law requiring that all listed European companies report under International Financial Reporting Standards (IFRSs). In the UK, companies that are not listed have the option to report either under IFRSs or under UK GAAP[2].

Recently issued UK FRSs have, in any case, replicated the wording of corresponding IFRSs, reducing the differences between the two sets of standards significantly.