Prior to 2012, when the time period was relaxed to three years, public companies from the US and Japan moving operations to the UK were required to switch accounting principles during the first year and a half. The government believed this led to “substantial costs” for large and complex companies.
In tandem with announcing the planned change, the government has published a review of the 2012 rules, evaluating the effectiveness of the measures. It concluded that a transition period should be “permanently offered” to companies listed on US or Japanese stock exchanges.
Business minister Baroness Neville-Rolfe said: “These rules make it simpler and more cost effective for companies to bring business and jobs to the UK, without undermining the value we place on consistency and transparency in company accounts.”
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The development is the latest in a series of moves to encourage more companies to set up, or move to, the UK. Entrepreneurship visas being extended, corporation tax reduced and the growth of UKTI’s Sirius programme are all aimed at coming good on David Cameron and George Osborne’s pledge to make Britain the “best place in Europe to start, finance and grow a business”.
The government believes the relaxing of accounting principle changeover times will reduce the cost of setting up in the UK and allow it to become an “even more attractive base” for intentional businesses.
UK company law requires that accounts are prepared using UK GAAP or International Accounting Standards (IAS). The new regulations only apply to US and Japanese companies, as those from other countries where national GAAP is recognised as equivalent by the EU, were already permitted to use IAS (or in the case of China, the accounting principles were considered by the EU to be very close to IAS).
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