The UK parliament’s upper chamber has warned the country’s business minister to ensure the audit regulator is able to scrutinise international accounting standards after Brexit.
In a scrutiny report assessing government proposals for a post-Brexit endorsement regime for the International Financial Reporting Standards (IFRS), a House of Lords committee said Greg Clark must “satisfy himself as to the Financial Reporting Council’s [FRC] ability to provide effective oversight of this important function.”
The report was published last week, prior to the government’s decision to abolish the FRC and replace it with a stronger and more accountable body.
A spokesperson for the business, energy and industrial strategy department said: “We want to ensure that UK registered companies that currently use IFRS will not have to change their processes for preparing annual accounts on the UK’s exit from the EU.
“The statutory instrument gives the government powers to adopt new international accounting standards for use in the UK.”
The government published legislation to bring in the new endorsement mechanism on 31 January.
An explanatory memorandum accompanying the draft legislation stated that UK’s overall policy objective was to remain aligned with IFRS rules as issued by the IFRS Foundation.
BEIS said in an accompanying memorandum that it was “in the UK’s interest to maintain convergence with IFRS after EU exit” given that IFRS are “used globally, by over 140 jurisdictions including 15 of the G20 countries”.
Nonetheless, the addition of UK parliamentary oversight after Brexit raises the prospect that IFRS changes and additions will face intense scrutiny before they are endorsed for use in the UK.
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Scrutiny report
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