ASB 'should tackle FRS conflict'

News Article - 03 January 2007
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The Accounting Standards Board (ASB) needs to highlight where companies should tackle issues of confusion with regard to financial reporting standards (FRSs) 3 and 26, the Urgent Issues Task Force (UITF) has stated.

Since making the recommendation, the UITF has provided a limited amendment to FRS 3, Reporting Financial Performance, which would resolve the divergence on the treatment of losses and gains on the revaluation of financial instruments.

Should the amendment be adopted, it would apply to businesses in the UK under FRS 26, Financial Instruments: Recognition and Measurement.

Andy Simmonds, UITF member, said: "Essentially, what you have is two different standards which tell companies to put gains and losses, for example, in different places."

While FRS 26 specifies how gains and losses should be treated with regard to derecognition or revaluation, FRS 3 stipulates the treatment of gains and losses for liabilities and assets.

"It has been suggested that there is a conflict," Mr Simmonds added.

Unrealised gains and losses on available-for-sale assets of insurance businesses are currently required to be recognised in the statement of gains and losses through the profit and loss statement under FRS 26.

This compares with FRS3 which outlines that such gains and losses are included in the profit and loss account as part of the investment return.

Article keywords: The private equity tax arrangements of firms which avoid paying their &quot;fair share&quot; of corporation tax have the potential to result in bigger bills for other companies and individuals, it has been claimed.<br/><br/>In a letter to the Daily Telegraph, the chief executive of global industrial rental company Aggreko, Rupert Soames, waded into the debate on private equity arrangements, stating that &quot;if large swathes of the UK economy pay less tax, other companies and individuals pay more&quot;.<br/><br/>According to website Accountancy Age, private equity tax firms have been accused of exploiting interest relief rules, with arrangements often involving large debts being offset against UK tax, with offshore operations in place to limit how much tax is paid.<br/><br/>The Telegraph recently reported that five of the UK's top ten largest private equity-owned firms had, in effect, not paid any corporation tax during 2005-06 after receiving an &#163;11 million tax credit.<br/><br/>Britain's general union, GMB, is planning to stage a protest today at the annual meeting of the private equity industry in Frankfurt, after accusing the sector of avoiding tax.<br/>

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