The U.K. government named a chairman for a new international accounting standards board, which is expected to be operational once the country’s transition period with the European Union is over.
Pauline Wallace, a former partner at PricewaterhouseCoopers who also served in several regulatory roles, will head the newly created U.K. Accounting Standards Endorsement Board, according to the Department for Business, Energy and Industrial Strategy.
The board will have up to 14 members and is expected to be operational in early 2021. The other board members will be selected by Ms. Wallace and confirmed by the U.K. Secretary of State, the BEIS said on Monday.
The U.K., which officially left the EU at the end of January, is currently in a transition phase during which European laws continue to apply. This period is set to end on Dec. 31, after which the country will have its own procedures on how to adopt International Financial Reporting Standards, or IFRS.
IFRS accounting standards are applied in over 125 countries around the world, including the EU and the U.K. They are drafted and released by the International Accounting Standards Board, which is based in London. So far, IFRS rules applied in the U.K. were endorsed by the EU.
For companies, the shift to the new U.K. board is mainly technical, at least for the time being, as both sets of standards—those endorsed by the U.K. and those endorsed by the EU—will be the same on Jan. 1. But, there could be differences at a later time if the U.K. adopts or amends a standard and the EU doesn’t, according to the BEIS.
There are other changes that come with the end of the transition period. U.K. companies will have to appoint an audit firm registered in the U.K., and an individual U.K.-registered auditor will need to sign off on the audit report, according to the BEIS. Audit committees at so-called public-interest entities, such as credit and insurance businesses, will have to follow U.K. regulations.
“The UKEB [U.K. Accounting Standards Endorsement Board] will enable the U.K. to continue to play a leading role in international financial reporting and ensure the U.K. retains its status as home to one of the strongest capital markets in the world,” said Lord Callanan, Minister for Corporate Responsibility.
The U.K. is currently in the process of setting up a new industry regulator—the Audit, Reporting and Governance Authority—amid concerns about the quality of work provided by the country’s largest audit firms.
The Big Four, which consist of PwC, Deloitte, KPMG and Ernst & Young, are currently working on proposals to separate their audit businesses from the rest of their organizations. The operational separation is supposed to be completed in June 2024.
Write to Nina Trentmann at [email protected]
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