Bulletin B-10 required all nonmonetary assets and liabilities to be restated for changes in the

purchasing power of the peso using the National Consumer Price Index (NCPI) published by
the Central Bank. Prior to the Fifth Amendment to B-10 in 1996, estimated replacement costs
were acceptable for restating inventory and fi xed assets, but later this was only permissible
for inventory. Equity accounts also had to be restated using the NCPI to refl ect paid-in
capital at constant purchasing power. The third important element of the Mexican infl ation
accounting system was the recognition in income of the gain or loss from the net monetary
asset or liability position. All comparative fi nancial statements from prior years also should
be restated to constant pesos as of the date of the most recent balance sheet. Both large and
small enterprises followed the same set of accounting standards.
Bulletin B-10 also introduced a novel concept called the integral result of fi nancing,
which was reported as a separate line item on the income statement. This is calculated by
adding the nominal interest expense, the gain or loss due to pricelevel changes on the
company’s net monetary position, and the gains and losses due to exchange rate fl uctuations
on the company’s monetary assets and liabilities denominated in foreign currencies.
Before 1996, current replacement cost based on appraisals or specifi c price indexes was
also acceptable. This approach was eliminated because it was viewed as less reliable and less
in line with international standards based on historical cost.
MIPA, being one of the nine founding members of the IASC, has shown a keen interest
in international harmonization of accounting standards. The United States has a dominant infl
uence on accounting standards in Mexico. For example, many of the pioneers of the Mexican
accounting profession grew up on “American accounting.” 56 However, the standards issued
by the FASB did not always meet the Mexican requirements; for example, Latin American fi
nancial reports are prepared for creditors, owner-managers, and tax collectors, while
accounting standards and fi nancial reports in the United States are directed toward the
investor as the intended subject. As a result, the national standard-setters in Mexico have also
looked at “principles-based” IFRS as a reference for upgrading Mexican GAAP. There are
signs of convergence with IFRS in recent years. For example, in line with IAS 29, Mexico
has given up on infl ation accounting recently. Bulletin B-10 require that nonmonetary items
of the fi nancial statements be restated for the effects of infl ation, irrespective of the level of
infl ation. However, as a result of low infl ation rates in Mexico in recent years, it does not
seem to satisfy the conditions set out in IAS 29, Financial Reporting in Hyperinfl ationary
Economies, for such statements. However, Mexican stakeholders strongly expressed the view
that even though price levels have been stabilized in the recent period, it is still more benefi
cial to the business community to maintain the practice of restating the effects of infl ation in
the country. In the past, the effects of infl ation were recorded for accounting and tax
purposes in Mexico. However, more recent amendments to Mexico’s FRS B-10 require
corporations to include the effects of infl ation in fi nancial statements only if such infl ation
exceeds 26 percent (the combined infl ation of the last three years). Infl ation continues to be
taken into account in the determination of taxes to be paid.
UNITED KINGDOM
Background
The United Kingdom consists of four constituent regions: England, Wales,
Scotland, and Northern Ireland. The legislative authority lies with Parliament, which includes
the House of Commons and the House of Lords. The House of Commons has 659 directly
elected members, whose term of offi ce is a maximum of fi ve years. The House of Lords is
appointed and consists of 92 hereditary peers, over 500 life peers, certain senior judges, and
26 bishops of the Church of England.
The limited liability company is the main form of business organization in the United
Kingdom, and the capital market provides the main source of funding for business.
Consequently, facilitating the effi cient working of the capital market is the primary purpose
of accounting. There are approximately 15,000 private limited companies (PLCs), of which
about 2,500 are listed on the London Stock Exchange. 58 The United Kingdom has by far the
greatest number of companies listed on a regulated market in the European Union. Listed
companies and other large companies fi le a full set of audited annual fi nancial statements
with the Registrar of Companies. The annual report of a UK-listed company typically
includes, in addition to fi nancial statements, a chairperson’s statement, an operating and fi
nancial review, the report of the directors, the report of the remuneration committee, a
statement on corporate governance, and shareholding information.
Accounting Profession
Accounting in the United Kingdom grew as an independent discipline, responding to
business needs, and has had a signifi cant infl uence on the development of the accounting
profession in many countries, including the United States and member countries of the British
Commonwealth such as Canada, Australia, and New Zealand. The establishment of the fi rst
professional accounting body, the Society of Accountants in Edinburgh, in 1853 can be
regarded as the beginning of the modern accounting profession. 59 There are six professional
bodies in the United Kingdom. In order of membership size, these are the Institute of
Chartered
Accountants in England and Wales (ICAEW), the Association of Chartered Certifi ed
Accountants (ACCA), the Chartered Institute of Management Accountants (CIMA), the
Institute of Chartered Accountants in Scotland (ICAS), the Chartered Institute of Public
Finance and Accountancy (CIPFA), and the Institute of Chartered Accountants in Ireland
(ICAI). The ICAEW alone has more than 140,000 members. It is the largest professional
accounting body in Europe. The UK accountancy bodies, enjoying Royal Charters, exercise
considerable social power. They act as statutory regulators for the auditing and the insolvency
sectors. The activities of the six bodies are coordinated through the Consultative Committee
of Accountancy Bodies (CCAB), established in May 1974. Members of CIMA and CIPFA are
not allowed to sign audit opinions. Since the formation of the Financial Reporting Council
(FRC) as the regulator for accounting matters, CCAB became more focused on auditing and
therefore less relevant to CIMA members. In March 2011, CIMA left CCAB
Professional accounting bodies in the United Kingdom do not require aspiring members to
have an undergraduate degree in accounting. However, those who possess an undergraduate
degree in accounting would qualify for exemptions from the full examination structure. The
three Institutes of Chartered Accountants have been the main training bodies for the members
of the big accounting fi rms in the respective regions of the United Kingdom. The
membership of ACCA mainly consists of small practitioners and individuals from the
corporate sector, while the main foci of CIMA and CIPFA are on management accounting and
accounting in government organizations, respectively. All six professional accounting bodies
set comprehensive exams for admission to their bodies. The examinations test knowledge at
the basic, intermediate, and advanced levels. Those aspiring to be members of the three
Institutes of Chartered Accountants are required to enter into training contracts with approved
organizations (traditionally accounting fi rms, but now extended to large companies) while
completing their examinations.
The ICAEW in September 2000 introduced a new examination structure consisting of a
professional stage and an advanced stage. The professional stage, which students can take
prior to entering a training contract, consists of six subjects and two modules in law whose
assessment is devolved to tuition providers. Students can gain exemptions from individual
subjects at this stage if they have completed relevant diplomas, degrees, or examinations of
other professional bodies. The advanced stage consists of a Test of Advanced Technical
Competence (TATC) and an Advanced Case Study. The advanced stage adopts “a
multidisciplinary approach, breaking down the old subject by subject ‘tunnel vision,’
integrating tax, audit, fi nancial reporting and business topics, including business strategy,
knowledge management and communication, digital economy, fi nancial strategy, mergers
and acquisition, change management, and business recovery.” 60 From July 2013, updated
syllabi for the two stage modules will be available.
Over the years, there have been several attempts at consolidating the UK accountancy
profession by a merger of the three chartered bodies (CIMA, CIPFA, and ICAEW). This
would create an organization with more than 200,000 members and become the authoritative
voice across the accountancy profession in the United Kingdom. However, this has not
materialized as a result of the inability of the three bodies to reach an agreement on some
aspects of the merger.
Accounting Regulation
Regulation of accounting and fi nancial reporting in the United Kingdom primarily is
through legislation (Companies Act), professional pronouncements, and stock exchange
listing requirements. The idea that determination of acceptable accounting principles and
standards should be left in the hands of the profession has been part of the UK tradition.
Unlike their counterparts in the United States, traditionally, UK legislators have never felt the
need to have a powerful securities commission to regulate accounting and fi nancial reporting
with detailed rules. Recent developments, however, suggest a change to this attitude, as the
Financial Reporting Council (FRC) has become the powerful independent regulator
responsible for promoting confi dence in corporate reporting and governance in the UK.
The United Kingdom joined the European Union in 1973. Since then, EU directives have
had a strong impact on UK accounting regulation. EU directives are transformed into UK
legislation through the Companies Act. The EU Fourth Directive was integrated into British
law in 1981 through amendments to the Companies Act of 1948. These amendments were
prescriptive to a degree previously unknown in the United Kingdom. Traditionally, the
Companies Act would normally set out the general principles, leaving the specifi c
requirements to be developed through other channels, particularly the accounting profession.
However, the 1981 amendments to the Companies Act state exactly how certain matters are
to be disclosed, with no latitude, for example, in matters of format. Similarly, the Companies
Act of 1989 introduced the EU Seventh and Eighth Directives. 62
 As a result of the EU Eighth Directive, in order to qualify to practice as an auditor in the
United Kingdom, a candidate is required to be registered in a statutory register maintained by
one of the professional bodies. The 1989 Companies Act also requires companies to state
whether the fi nancial statements have been prepared in accordance with applicable
accounting standards and, if not, give reasons for the departure. This is also an important
change, because, prior to the 1989 Companies Act, UK accounting standards were not
referred to in company legislation.
In 2000, the British government, in partnership with the professional accountancy bodies,
established the Accountancy Foundation, to be responsible for the nonstatutory independent
regulation of the six professional chartered accountancy bodies comprising the CCAB. The
purpose of establishing the Accountancy Foundation was to ensure that self-regulation would
be conducted in the public interest.
In response to accounting scandals in the United States, such as those related to Enron
and WorldCom, several steps have been taken to improve regulation of fi nancial reporting in
the United Kingdom. The Department of Trade and Industry initiated a review of the
Accountancy Foundation in October 2002 by publishing a consultation document on how the
UK accountancy and auditing professions are to be regulated. It highlighted a number of
issues:
• Whether the professional organizations should continue to set their own ethical standards
and monitor the work and conduct of audit fi rms, or whether there should be stronger
independent oversight or intervention
• Whether the Accountancy Foundation should focus on the company auditor rather than on
the regulation of accountants in general.
• Whether the structure and funding of the Accountancy Foundation should be reviewed.
The second main element of the UK regulatory system is professional pronouncements.
The establishment of the Accounting Standards Steering Committee in 1970 by the ICAEW
was the beginning of the development of formal accounting standards in the United
Kingdom. The fi rst Statement of Standard Accounting Practice (SSAP 1), on “Accounting
for the Results of Associated Companies,” was issued in January 1971. The committee was
later redesignated as the Accounting Standards Committee (ASC), which was reconstituted as
a joint committee of the six professional bodies in 1976. The ASC standard-setting
mechanism came under heavy criticism in the 1980s for a lack of effective means of
monitoring compliance and the low quality of its standards. In response, the Dearing Report
recommended signifi cant changes to the UK standard-setting process, which included the
creation of the following: 63
1. The Accounting Standards Board (ASB), with the authority to issue standards in its own
right.
2. The Financial Reporting Council (FRC), given the responsibility of overall policy control
over the standard-setting process.
3. The Financial Reporting Review Panel (FRRP), to oversee compliance.
 The creation of the ASB in August 1990 marked the beginning of a new era in accounting
standard-setting in the United Kingdom. It reduced the direct infl uence of the accounting
profession on standard-setting, because the ASB, like the U.S. FASB, is institutionally
separated from the accounting institutes. The role of the FRC, also created in 1991, was to
secure funding for the ASB and FRRP, which functioned under its purview. The FRC also
acted as a high-level policy body that provided guidance to the ASB on priorities and work
programs, advised the board in broad terms on issues of public concern, and encouraged
compliance.
Following the major corporate collapses in the United States, in January 2003, the
Secretary of State for Trade and Industry announced a package of reforms to raise standards
of corporate governance, strengthen the accountancy and audit professions, and provide for
an independent system of regulation for those professions. Accordingly, the FRC assumed the
functions of the Accountancy Foundation. As part of the reforms in July 2012, setting
accounting standards became the responsibility of the FRC Board, whereas this had
previously been done by the ASB. In addition to being responsible for issuing accounting
standards and dealing with their enforcement, the FRC is also responsible for promoting
highquality corporate governance and reporting to foster investment. It also monitors and
takes action to promote the quality of corporate reporting andauditing, operates independent
disciplinary arrangements for accountants and actuaries, and oversees the regulatory activities
of the accountancy and actuarial professional bodies.
With the assumption of these responsibilities, the FRC became the single, independent
regulator of accounting and auditing in the United Kingdom. For example, it assumed
responsibility for setting independence standards for auditors and for monitoring the audit of
listed companies, and other signifi cant entities were transferred from the accounting
professional bodies to the FRC. The FRC also retains its current responsibilities for the work
of the ASB and the FRRP.
In addition, the FRC represents UK interests in international standard-setting through the
IASB, and collaborates with accounting standard-setters from other countries—both in order
to infl uence the development of international standards
According to the annual report, the key themes of the FRC’s work for 2009/2010 would be
to infl uence (1) market participants to meet high standards of reporting and governance
through a combination of measures to raise awareness of major risks, monitor corporate
reporting and governance practices, and take enforcement action where appropriate; (2)
legislators and international standard-setters to encourage a proportionate and principles-
based approach that promotes high standards of corporate reporting and governance; and (3)
international regulatory authorities to encourage effective cooperation (p. 10).
The ASB, adopting a principles-based approach, develops its standards on the basis of a
conceptual framework known as the “Statement of Principles for Financial Reporting.” The
ASB makes, amends, and withdraws accounting standards, assisted by four committees: (1)
the Urgent Issues Task Force, (2) the Financial Sector and Other Special Industries
Committee, (3) the Public Sector and Not-forprofi t Committee, and (4) the Committee on
Accounting for Smaller Entities. The standards issued by the ASB are called Financial
Reporting Standards (FRS).
 The ASB is one of several national standard-setters that have a formal liaison relationship
with the IASB. The ASB is committed to align UK accounting standards with IFRS wherever
practicable, by a phased replacement of existing UK standards with new UK standards based
on IFRS. 64 According to the FRC annualand to ensure that its standards are developed with
due regard to international developments. report for 2008/2009, the ASB faces three major
challenges. The fi rst challenge is to continue to ensure an appropriate infl uence on the
development of IFRS through high-quality submissions to, and communications with, the
IASB, arguing the case for accounting standards based on clear principles rather than detailed
rules. The second challenge is to work for the timely adoption of IFRS as developed by the
IASB for adoption in the EU. As fi nancial reporting has become increasingly political, the
ASB will have to work hard with its European counterparts and EFRAG to maintain the
policy of using IFRS in Europe. The fi nal challenge is to develop an appropriate strategy for
the future of UK GAAP. The main purpose of the FRRP, which was established in 1991, is to
review companies’ fi nancial statements to ensure fair presentation of information. The FRRP
adopts a proactive role for the enforcement of accounting standards in which the Financial
Services Authority (FSA), the UK fi nance watchdog, plays an active part. 65 The FRRP can
ask directors to explain apparent departures from the accounting requirements. If the panel is
not satisfi ed by the directors’ explanations, it persuades them to adopt a more appropriate
accounting treatment. Failing this, the panel can exercise its powers to secure the necessary
revision of the original accounts through a court order.
Under the Companies Act of 2004, which came into effect in October 2004, 66 the authority
of the FRRP would be extended to cover fi nancial information, other than annual accounts,
published by entities that have securities listed on a UK market and where mandatory
accounting requirements may apply.
In May 2007, the FRRP issued a consultation paper aimed at improving the quality and
credibility of annual fi nancial statements. The panel seeks to ensure that the provision of fi
nancial statements by public and large companies complies with the reporting requirements
of the Companies Act of 1985. The panel currently relies on users of accounts bringing such
reports to its attention, but this often happens some considerable time after publication. The
panel proposes that registered audit fi rms disclose voluntarily to the panel any audit report
they issue in respect of annual fi nancial statements in which their opinion is qualifi ed for
failure to comply with the reporting requirements of the Companies Act.
Auditing standards in the United Kingdom are issued by the Auditing Practices Board
(APB), an operating body of the FRC. They include Statements of Auditing Standars (SASs),
Auditing Guidelines, and Statements of Investment Circular Reporting Standards (SIRs). The
APB is funded by the CCAB, and its membership consists of practicing auditors and others
from business, academia, law, and the public sector.
The third element of the UK regulatory system is stock exchange listing requirements. The
London Stock Exchange (LSE) requires publication of a semiannual interim report and
disclosure of information about corporate governance and directors’ remuneration. Unlike in
Germany or Japan, taxation rules are not a major infl uence on fi nancial reporting in the
United Kingdom.
In July 2012, the Codes & Standards Committee was established to advise the FRC Board on
maintaining an effective framework of UK codes and standards. The Accounting Council also
replaced the Accounting Standards Board (ASB), assuming an advisory role to the Codes &
Standards Committee and the FRC Board. The
Accounting Council comprises up to 12 members, at least half of whom are practicing
members of the relevant profession and the remainder are other stakeholders. The revised
Corporate Governance Code (formerly the Combined Code) was issued in September 2012,
applicable to reporting periods beginning on or after
October 1, 2012. One of the new provisions states that FTSE 350 companies should put the
external audit contract out to tender at least every 10 years. Listed companies are required to
report on how they have applied the main principles of the
Code, and either to confi rm that they have complied with the Code’s provisions or—where
they have not—to provide an explanation, so that their shareholders can understand the
reasons for doing so and judge whether they are content with the approach the company has
taken. To help companies understand what is expected of them and for shareholders to have a
benchmark against which to assess explanations, the FRC published a paper titled “What
Constitutes an Explanation under ‘Comply or Explain’.” Companies are also encouraged to
state, when they fi rst report against the 2012 Code, whether or not they anticipate putting the
audit contract out to tender in due course. These new features have been incorporated in
found that more than half of the companies complied with this requirement.
Accounting Principles and Practices
Accounting principles in the United Kingdom emphasize investor needs and the importance
of transparency. UK fi nancial statements typically include a profi t and loss account, a
balance sheet, a cash fl ow statement, a statement of total gains and losses, a statement of
accounting policies, notes to fi nancial statements, and the auditor’s report. The United
Kingdom has a differential fi nancial reporting system in which small and medium-size
companies are exempt from many reporting requirements.
The 1985 Companies Act requires corporate fi nancial statements to provide a true and fair
view of the fi rm’s fi nancial position and results of operations for the financial year. Auditors
are given the corresponding duty to render an opinion on whether a true and fair view is
provided. True and fair view is not specifi cally defined in law. The legal opinion is that
compliance with accounting standards is necessary to meet the true and fair requirement.
However, this requirement is overriding and may require more than just compliance with
accounting standards. For example, the Companies Act specifi cally stipulates that if
compliance with the act “would not be suffi cient to give a true and fair view, the necessary
addtional information shall be given in the accounts or in a note to them” [Section 226 (2)].
Therefore, while accounting standards are a necessary component of a true and fair view, they
may not in themselves be suffi cient in all situations to provide a true and fair view.
Professional judgment remains an essential additional component. In incorporating the Fourth
and Seventh Directives, which had a more prescriptive approach, into the national law,
extensive use was made of options in order to preserve the importance of professional
judgment.
In an opinion published in May 2008, the FRC confi rmed the continued relevance of the
“true and fair” concept to the preparation and audit of fi nancial statements following the
enactment of the Companies Act of 2006 and the introduction of international accounting
standards.
Since January 1, 2005, UK-listed companies must use European Union–adopted IFRS to
prepare their group fi nancial statements. 67 They are permitted, but not required, to use IFRS
for their individual accounts. Other companies and limited liability partnerships are
permitted, but not required, to use IFRS for both their consolidated and individual accounts.
UK standards will therefore still be available for all fi nancial statements other than the
consolidated accounts of listed groups. The Financial Reporting Review Panel in its 2010
annual report states that there has been a continuous improvement in the general quality of
IFRS fi nancial reporting.
Financial statements generally are prepared on the basis of historical cost, but companies are
allowed to revalue tangible assets. In general, UK accounting standards are very similar to
IFRS, as the international standards have been heavily infl uenced by British accounting.
However, specifi c differences do exist between
IFRS and UK GAAP. (The acronym GAAP stands for “Generally Accepted
Accounting Practice” or “Generally Accepted Accounting Principles” or “Generally Accepted
Accounting Policies.” GAAP is a term used to describe the rules generally accepted as being
applicable to accounting practices as laid down by standards or legislation, or upheld by the
accounting profession.) In some areas, there is a difference in requirements under the two sets
of standards. For example, segment reporting in the United Kingdom does not follow the
primary–secondary reporting format approach found in IAS 14. In other areas, UK rules are
more fl exible. For example, whereas IFRS 3 requires that goodwill should not be amortized
systematically, but instead should be subject to an annual impairment test, UK
GAAP allows amortization at the fi rm’s discretion. Exhibit 6.12 provides a summary of
several differences that exist between UK GAAP and IFRS. Recently, the FRC published a
discussion paper on reducing complexity in corporate reporting. The paper seeks to address
growing concerns about the complexity of corporate reporting in terms of, for example,
increasing length and detail of annual reports and the regulations that govern them. The paper
recommends a commonsense approach to reducing complexity based on eight guiding
principles divided into two categories.
Guiding Principles for Regulation
1. Regulations should focus on signifi cant problems and be targeted to:
• Provide relevant information that meets important user needs.
• Reflect the reality of the business while minimizing unintended implementation
consequences.
2. Regulators should limit constant change by intervening only when an area is high-risk and
change will bring obvious benefi t. Intervention should be as cost effective as possible—for
example, by using management information already produced for internal purposes.
3. Regulators should understand what other national and international regulators are doing in
a particular area. Wherever possible, they should be consistent with one another and work
together in a joined-up way.
 4. Regulations should be kept simple and user-friendly. They need to be understood easily by
those who will apply them and those who will benefi t from them. Regulations should
emphasize:
• A clear articulation of the desired outcome.
• Principles and judgment where appropriate.
• Plain language with well-defined terms.
• Consistent terminology.
• An easy-to-follow structure.
Guiding Principles for Communication
1. Highlight important messages, transactions, and accounting policies, and avoid distracting
readers with immaterial clutter.
2. Provide a balanced explanation of the results—the good news and the bad.
3. Use plain language, only well-defi ned technical terms, consistent terminology, and an
easy-to-follow structure.
4. Get the point across with a report that holds the reader’s attention. The discussion paper is
focused on the activities of UK publicly traded companies, but its recommendations could be
useful to all companies, and it would stimulate discussions around the world, regarding
corporate reporting.
The United Kingdom has the second greatest number of foreign companies listed on the New
York Stock Exchange (Canada has the most). Exhibit 6.13 provides useful information about
the accounting standards adopted by Vodafone
Group in preparing fi nancial statements according to its 2011 annual report. Note that there
is no need to reconcile the UK standards and U.S. GAAP, as the fi nancial statements were in
compliance with IFRS.
The annual reports of listed companies have become too complex and focused on
compliance, rather than providing useful information on the business to investors. In
addressing this issue, the Institute of Chartered Accountants of Scotland
(ICAS) has provided a document entitled “Making Corporate Reports Readable,” which
contains a pro forma short form report that uses the example of a fi ctional universal bank as
the underlying business and produces “in less than 30 pages” the key information of interest
to investors. The ASB has issued a Financial Reporting Standard (FRS), Improvements to
Financial Reporting Standards 2009, so as to maintain the existing levels of convergence
between UK and IFRS in 2009. FRC’s guiding principles for communication to reduce
complexity in fi nancial reporting:
1. Highlight important messages, transactions, and accounting policies, and avoid
distracting readers with immaterial clutter.
2. Provide a balanced explanation of the results—the good news and the bad.
 3. Use plain language, only well-defi ned technical terms, consistent terminology, and an
easy-to-follow structure.
4. Get the point across with a report that holds the reader’s attention.
The FRC developed a suite of three standards, FRC 100, FRC 101, and FRC 102, by taking
into account feedback received over many years and with the stated aim of simplifying
accounting and reporting for unlisted entities, improving reporting of fi nancial instruments,
and providing cost savings for subsidiaries of listed groups. These standards will be
applicable to all companies and entities in the UK and Republic of Ireland, other than listed
groups. They will be effective from
January 1, 2015, but may be adopted early.
FRS 100 (Published in November 2012)
FRS 100 sets out the overall fi nancial reporting requirements, giving many entities a choice
of detailed accounting requirements depending on factors such as size and whether or not
they are part of a listed group. It does not require any entities to apply international
accounting standards that they are not already required to apply; for example, investment
entities are allowed not to consolidate, but they should report earnings from investments at
fair value. This is effective from January 1, 2014.
This standard is expected to be endorsed by the EU in the second half of 2013.
FRS 101 (Expected early 2013)
FRS 101, Reduced Disclosure Framework, applies to the individual fi nancial statements of
subsidiaries and ultimate parents, allowing them to apply the same accounting as in their
listed group accounts, but with fewer disclosures. This will reduce the reporting burden on
listed groups
FRS 102 (Expected in January 2015)
FRS 102, Financial Reporting Standard Applicable in the UK and Republic of Ireland, will
complete the suite of three new fi nancial reporting standards.
Further, in October 2012, in an effort to make narrative reporting simpler, clearer, and more
focused, the UK Department for Business, Innovation and Skills (BIS) published draft
regulations for narrative reporting. The key points of the draft regulation are:
• A separate strategic report replaces the business review and includes some extra content for
quoted companies concerning the business model, human rights, and diversity.
• The directors’ report is retained largely unchanged except that it now excludes the content
that is in the new strategic report.
• Shareholders who currently receive only the summary fi nancial statement will in the future
receive the strategic report instead. Thar is quite a signifi cant change, because it replaces a
summarized P&L and balance sheet with what is essentially a narrative discussion about the
company’s strategy and performance