International Accounting Standards


By David Halstead of Deloitte & Touche

Following the 'Norwalk Agreement', the goal of a single set of international accounting standards is in sight.

From 2005, UK accounting standards will effectively be replaced by International Accounting Standards (IAS) as a result of an EU directive affecting all European public companies.

For many Cambridge-based businesses, the convergence of UK and US rules will be a welcome step, simplifying the process of being listed on NASDAQ and allowing more straightforward comparisons between UK and US companies.

The differences between British and American accounting rules have, until now, been a major problem for many companies. In the main this is caused by the different approach taken in the two countries. The US system has favoured having a specific rule for every circumstance - which, unfortunately, means a lack of clarity on how to deal with circumstances that fall outside of the norm.

In contrast, the UK follows a process based primarily on principles, with some specific rules. This approach allows real intellectual rigour to be applied to accounting.

I have no doubt that there will be problems and differences of opinion as we move forward, but I really do believe that these are positive steps towards an internationally accepted set of accounting principles. And convergence is not only happening between the US and Europe. Other countries, such as Australia, are also planning to adopt IAS.

For the many businesses currently unsure of how IAS will affect them, my advice is to start thinking now about how to respond.

For some companies, the impact of IAS will be minimal. For others there will be areas of complexity, such as pensions, development expenditure, share option schemes and hedging instruments, and trends in results will be affected.

  • The DTI has just announced that it will allow UK companies to decide between International Accounting Standards (IAS) and UK GAAP post 2005 for group subsidiaries. See

    David Halstead is a Partner at Deloitte & Touche in Cambridge. Contact him by email

    4 August 2003

    This article first appeared in Tangent, a fortnightly column offering business advice and comment

    The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

    Deloitte LLP