True and Fair

The Statutory Instrument The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 No. 685 includes specific requirements when considering the adoption of a new or amended international accounting standard for use in the UK. Regulation 7(1) states, amongst other things, that:

“The Secretary of State may only adopt an international accounting standard under regulation 6 if the Secretary of State is of the view that, in relation to the form of the standard the Secretary of State intends to adopt—

The standard is not contrary to either of the following principles—

1. an undertaking’s accounts must give a true and fair view of the undertaking’s assets, liabilities, financial position and profit or loss;
2. consolidated accounts must give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included in the accounts

…....”

The above requirement was on-shored into UK legislation as a result of UK’s Exit from the EU and replicates preceding requirements in this area. The Secretary of State delegated the statutory function of the adoption of international accounting standards to the UK Endorsement Board in May 2021.

Given the change in legislation, the UKEB sought to clarify the legal position and the approach to be taken when assessing a standard against the criteria in Regulation 7(1)(a) and obtained an Opinion from Michael Todd QC and Jack Rivett on the meaning of Regulation 7(1)(a).

As the UKEB’s technical assessments will be influenced by the views put forward in this Opinion, the Board is making it available to stakeholders to ensure accountability, independence and transparency of all its technical decision-making.