In Luxembourg, most investment entities prepare their financial statements under Luxembourg GAAP. Luxembourg GAAP is light on disclosures compared to IFRS. The IFRS European Directive was written into commercial law in Luxembourg, that is separate to the law governing Investment Funds. Promoters can opt to prepare financial statements under IFRS but a formal submission must be made to the Commission de Surveillance du Secteur Financier (“CSSF”) for approval to do so.
United Kingdom and Ireland
The Accounting Standards Board (ASB) in the United Kingdom has been a key promoter of IFRS. In March 2005, the ASB proposed to bring UK standards into line with IFRS using a phased approach, bringing a number of standards on related topics into effect each year over a three to four year period. This has resulted in Financial Reporting Standards being issued that are aligned to IFRS such as FRS 25 and FRS26 (IAS 32 and IAS39). These standards also apply to Irish entities, including investment funds as Irish GAAP is fully aligned to the standards issued by the ASB.
In its latest consultation paper, the ASB seeks views on its intention to work under the IASB framework and to converge to the fullest extent possible with IFRS, in a way that is consistent with the needs of UK and Irish entities. A potential result would see current UK GAAP ceasing to exist, replaced by three tiers. Tier 1 includes entities that are “Publicly Accountable” and would be subject to full IFRS reporting, Tier 2 would be IFRS for SMEs, and Tier 3 would include a Financial Reporting Standard for Smaller Entities (FRSSE). Over 150 submissions have been made to the ASB from interested parties across the industry. In the current draft, an investment entity would be considered a publicly accountable body and would therefore require full IFRS reporting. The Irish Funds Industry Association (“IFIA”) have proposed a separate IFRS for Investment Companies which would be similar in nature to the current Statement of Recommended Practice (“SORP”) issued by the IMA and used in the United Kingdom. Alternatively, the IFIA have suggested that investment entities be included within Tier 2 supported by additional disclosure and presentation requirements. The ASB is planning on introducing final amendments for financial years beginning on or after 1 January 2012 so the next 18 months will no doubt see a huge amount of discussion and change.
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