Chapter 11 - Financial Reporting

Abstract

This chapter focuses on the provisions related to financial reporting in the company law. The accounting standards in the UK have been developed by the Accounting Standards Board (ASB) under the auspices of the Financial Reporting Council (FRC), and a detailed consultation program has been undertaken for each new standard. From January 1, 2005, listed groups are required to adopt international accounting standards (IASs) in place of UK standards, and most other companies have the option of doing this in both individual and group accounts. The accounting standards apply to all accounts that are required to show a true and fair view, although they need not be applied to immaterial items. Directors are generally required to state whether the accounts have been prepared in accordance with applicable accounting standards. Additional disclosures must be given if the company departs from applicable accounting standards while preparing its annual accounts. The Urgent Issues Task Force (UITF) considers various interpretational issues arising from existing accounting and company law requirements. Having considered the issue and reached a conclusion, the UITF issues its consensus in the form of an Abstract, which usually becomes effective shortly after publication. Once it is in force, a UITF Abstract has the same authority, scope and application as an accounting standard and therefore forms part of standard accounting practice. The Financial Reporting Review Panel (FRRP) enquires into accounts that appear to depart from the requirements of company law, accounting standards and UITF Abstracts. Where revision of the accounts is considered necessary, the FRRP usually tries to reach voluntary arrangement with the directors, but it could seek a court order for revision of the accounts under section 245B of CA 1985 if it were unable to reach a satisfactory agreement with the directors.