Accounting standards derive from a number of sources. The chief standard-setter is the Accounting Standards Board (ASB), which issues standards called Financial Reporting Standards (FRSs). The ASB is a private-sector organisation, funded by the accounting firms, and it replaced the Accounting Standards Committee (ASC), which was disbanded in 1990 following a number of criticisms of its work. To the extent that the ASC's pronouncements, known as Statements of Standard Accounting Practice (SSAPs), have not been replaced by FRSs, they remain in force.
The ASB has a formal exposure process for proposed standards. Early concepts are issued as Discussion Papers. These are released to the public and comments invited. Where a new standard is to be proposed, a Financial Reporting Exposure Draft (FRED) is released for comment. The standard in final form is only issued when comments have been incorporated or addressed. This aims to address the criticisms levelled at the ASC, whose comment process was less rigorous.
Issues that require an immediate solution are considered by the Urgent Issues Task Force (UITF). The UITF comprises a number of senior figures from industry and accounting firms. It meets as necessary to consider pressing issues and issues Abstracts which become binding immediately.
The principal legislation governing reporting in the UK is laid down in the Companies Act 1985 and the Companies Act 1989 (together often referred to as the Companies Act). The Companies Act sets out certain minimum reporting requirements for companies and, for example, requires private limited companies to make their accounts available to the general public.
From 2005, this framework is likely to change as a result of the European Commission requiring that all listed European companies report under International Accounting Standards instead of their existing accounting policies. The ASB has controversially issued eight FREDs during 2002 which may become part of UK GAAP before 2005. Additionally FRS 17, Pensions, and FRS 19, Deferred Tax, both issued in December 2000, had introduced new requirements that were inconsistent with IAS. These changes, part of the ASB's aim of setting the agenda on convergence to IAS, have been met with widespread criticism by UK industry. Industry leaders are concerned that as a result of these new standards UK GAAP will change significantly every year from 2002 through 2005.