Step #6: Pick an accounting package that can handle U.S. GAAP, UK GAAP and IFRS – and can handle change. As a U.S. company, you’ll still need a solution that handles U.S. GAAP. But the U.K.’s Accounting Standards Board (ASB) is evaluating proposals that may end UK GAAP, possibly replacing it with a full version of IFRS (which is what other EU countries require) or a proposed Financial Reporting Standards for Medium-sized Entities (FRSME). It’s still unclear whether the ASB will require companies to move to IFRS (which the EU prefers) or to a new version of UK GAAP. The possibility of change is raising hackles across the U.K. accounting and business community. We’re not interested in taking sides on the issue. However, it is important that whatever accounting package you use can handle UK GAAP or IFRS – either one is okay right now – and is flexible enough to handle whatever changes the ASB proposes. To speed up monthly, quarterly and annual filings, make sure the accounting package you select can handle U.S. GAAP and U.K. GAAP or IFRS simultaneously. Otherwise, reconciling the two systems manually will require additional time and add lots of stress each time you close the books.
All listed UK Companies (either full listing FTSE or secondary (AIM)) have to produce their group accounts in IFRS format. There is still some debate when all other limited companies will need to do so, one thing is certain, it will come.
Step #7: If you adopt IFRS, find experts in the U.K. who can help establish good IFRS policies. As we’ve written about before, the challenge with a transition to IFRS is neither at the start nor after its completion. The most difficult part of the process is in the middle of the transition, when the companies have to report in U.S. GAAP and IFRS at the same time. That’s true for U.S. companies filing IFRS in the U.K. and GAAP in the U.S. Therefore, U.S. companies will need to get advice on how to set up IFRS for their U.K. operations.
We’ll wrap up tomorrow.
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