With Brexit, the question now is whether the British lawmakers would ask the British companies to file their financials using a different set of accounting rules than the current International Financial Reporting Standards. Some British politicians and investors have been heard saying that the IFRS has compounded the financial crisis and that these rules lack rigor.
I wouldn’t say that IFRS lacks rigor, as IFRS is more principle based it could lead to different interpretations for similar transactions which might lead to different accounting presentations by different companies. IFRS doesn’t necessarily define everything in the standard, it lets accountants use their judgment.But it doesn’t lack rigor, it is more open to interpretation and judgment.
If the listed companies in Britain do not use IFRS, then there are multiple issues. One being what would the new standards be, then implementing those standards and recreating the financials. As with change of standards, one would have to show prior period numbers under the new standards as well. It would be an accountant’s biggest nightmare. Considering that year end is nearing, this should be resolved quickly and in favor of status quo.
The other thing to consider is, if Britain moves away from IFRS, then the International Accounting Standards Board which is the standard setting board and is the one that issues IFRS will have to move from its current headquarter location in London to another country in the European Union. If Britain stops using IFRS, it puts a big question mark on the future of the standard itself. Also considering that for the past few years both FASB (Financial Accounting Standards Board- the board that works on US Generally Accepted Accounting Principles) and IASB have been working on the convergance project, it puts a question mark on the future of the project as well.