Cost and Benefits Assessment of Adopting IFRS Accounting Standards in the UK

International Forum of Accounting Standard Setters (IFASS) – 29 April 2026 Seema Jamil-O'Neill – Technical Director

The views expressed in this presentation are those of the presenter and not necessarily those of the Endorsement Board, nor are they necessarily reflective of any official policy or position.

Prevalence of IFRS in the UK

Estimated number of IFRS reporters in the UK

Approx. 11,000 entities¹

Of which: approx. 1,400 listed entities ²

Mandatory application

UKEB statutory functions

UKEB adoption criteria

When a standard or amendment is issued by the IASB, to adopt it for use in the UK, the UKEB must assess whether it meets the following criteria:

1. Standard is not contrary to the principle that the accounts must give a true and fair view
2. Standard meets the technical accounting criteria of understandability, relevance, reliability and comparability
3. The use of the standard is likely to be conducive to the long term public good (LTPG) in the UK

LTPG assessment: regulatory requirements

The long term public good assessment is comprised of a further technical analysis and an assessment of economic effects

1. Whether use of the standard is likely to improve the quality of financial reporting
2. Likely costs and benefits from the use of the standard
3. Whether use of the standard is likely to have an adverse effect on the UK economy

Focus of today's presentation

UKEB approach to costs and benefits assessment

Assessment of direct costs : UKEB questionnaire

• The UKEB developed a standardised questionnaire to assess implementation costs
• Survey questions are based on academic literature and industry expertise
• Direct (compliance) costs - preparers are asked about costs incurred as a direct result of meeting the requirements of the standard
• Costs are both monetary and opportunity costs
• The table displays the cost categories investigated through the survey

References: Meeks and Meeks (2002); Schipper (2010); IFAC (2010); HMRC (2022); BIS (2010)

Assessment of direct benefits for users

• Assessing direct benefits for users is more challenging because:
  • The impact on users' day-to-day activities and decision-making is difficult to identify and measure
  • Users typically would not draw conclusions on benefits before seeing the updated accounts
  • Impacts would depend on user type
  • Users generally find it more difficult to engage with standard setting
• So far, the UKEB has conducted only qualitative assessments of benefits for users, using a standardised questionnaire
• Future UKEB research may focus on a more systematic assessment of direct benefits to users. This would allow:
  • More targeted and better engagement
  • A potential quantification of benefits

Cost of capital effects: theory

References: Leuz and Wisocki (2016); Armstrong, Core, Taylor and Verrecchia (2011); Meeks and Meeks (2001)

Estimating cost of capital effects: UKEB approach

1. 1Implementation costs: for a given standard, the UKEB would firstly estimate market wide implementation costs
2. 2Benefits for users: for a given standard, the UKEB would then assess whether users are likely to find the standard useful
3. 3If users find the standard useful then it may be plausible to expect a cost of capital reduction
4. 4The approach aims to estimate what cost of capital reduction would allow preparers to recover the estimated implementation costs in the long run

How are the indirect benefits expected to be delivered?

Example: equity flows

4.4 Basis points is the market-wide cost of equity reduction required for the present value of future equity flows to increase by £200,000,000

Note: 1Bps = 0.01%. Baseline cost of equity: 11.23% Source: UKEB calculations based on LSEG and Reuters-Eikon data

Application to IFRS 18

Implementation costs: UKEB estimated UK-specific implementation costs for IFRS 18 to be £390m and assessed that the standard would deliver benefits to users

For preparers to recover these costs, split between the four capital market effects described in the previous slide

Assuming: 75% through equity markets, 25% through debt markets

Questions for NSS

• Are other NSSs required to consider costs/benefits of adopting a new standard for use in their jurisdictions?
• What approach do other standard setters take to estimate implementation costs? What challenges do they face?
• What approach do other standard setters take to estimate benefits to users? What challenges do they face?
• What benefits to preparers from implementing a new standard are considered?
• As noted, the cost of capital approach is a break-even analysis that estimates the cost of capital reduction needed to recover implementation costs.
  • Any thoughts on this type of analysis/narrative?
  • Do other standard setters see the benefits of implementing a similar approach in their jurisdictions?
  • If so, what challenges would they face?

Questions and answers