1.1 UK GAAP or IFRS?

Prior to 2005, all UK companies were required by the Companies Act 1985 (CA 85) to adopt UK GAAP (Generally Accepted Accounting Practice).

Following changes in EU Regulations, fully listed groups are required to adopt International Financial Reporting Standards (IFRS) in their consolidated accounts for accounts periods commencing on or after 1 January 2005. The European Regulation is mandatory for the consolidated accounts only. The Companies Act 1985 offers a number of options for the individual accounts of the members of a group (see 7.3).

Companies listed on the Alternative Investment Market (AIM) are outside the scope of the EU's so-called IAS Regulation, but are required by the London Stock Exchange to adopt IFRS for accounts periods commencing on or after 1 January 2007 (AIM companies may adopt earlier if they so choose).

All other categories of UK companies are permitted ( but not required) to adopt IFRS for accounts periods commencing on or after 1 January 2005, but CA 85 prohibits earlier adoption.

The terms "International Financial Reporting Standards" (IFRS) and "International Accounting Standards" (IAS) are effectively interchangeable. The Companies Act 1985 and the relevant tax legislation refer to "IAS". However, the more widely used (and more modern) term IFRS is used in this book.

This book deals mainly with the application of UK GAAP, although Chapter 7 refer to IFRS and convergence issues, and IFRS is referred to at the end of each chapter. In addition, Chapter 23 gives...