This document compares International Financial Reporting Standards (IFRS) to relevant UK accounting standards. It notes several differences between the standards, including differences in the treatment of inventories, cash flow statements, accounting policies, revenue recognition, employee benefits, taxes, property, leases, impairments, and financial instruments. Adoption of IFRS would require changes to accounting policies and additional disclosures for many UK companies.

1. APPENDIX 1 - COMPARISON OF IFRS WITH UK GAAP
International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 2 Inventories SSAP 9 Stocks and long-term
contracts
LIFO method valid in SSAP 9, not valid in IAS 2
IAS 7 Cash flow statements FRS 1 Cash flow statements FRS 1 Headings:
• Returns on investments and servicing of finance
• Taxation
• Capital expenditure and Financial Investment
• Acquisitions and disposals
• Equity dividends paid
• Management of liquid resources
• Financing
Are replaced by two headings in IAS 7:
• Investing Activities
• Financing Activities
Also important to note that the ‘reconciliation of
movements in cash flows to movements in net debt’ is
not required under IAS 7.
IAS 8 Accounting Policies,
Changes in Accounting
Estimates and Errors
FRS 18 Accounting Policies Under FRS 18, accounting policies must be reviewed to
ensure that they remain true and fair.
Under IAS 8, accounting policies can be changed only
if they result in financial statements giving more
relevant and reliable information.
IAS 10 Events after the balance
sheet date
FRS 21 Events after the balance
sheet date
No differences
IAS 11 Construction contracts SSAP 9 Stock and long-term
contracts
No difference where a contract is loss-making.
Where a contract is profit-making:
• SSAP 9 recognises prudently calculated profit only
if the outcome of the contract can be estimated
reliably
• IAS 11 allows application of the ‘percentage of
completion’ method if the outcome of the contract
can be estimated reliably.

2. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 12 Income taxes FRS 16
FRS 19
Current tax
Deferred tax
No difference with FRS 16
Differences with FRS 19:
• IAS 12 does not allow ‘discounting’ of deferred tax to
present day values (irrelevant, as not practiced by
HH)
• FRS 19 recognises deferred tax as ‘timing
differences’, while IAS 12 recognises deferred tax on
the basis of ‘taxable temporary differences’.
• Fundamental conceptual difference in measurement.
IAS 12 calculates temporary differences by
comparing the balance sheet value of items to the
value attributed to them for tax assessment purposes.
Therefore temporary differences include not only
timing differences (as per FRS 19), but other
differences between the accounting and tax bases of
items, for example, revaluation of assets for which no
equivalent adjustment is made for tax purposes
• Reconciliation required of the total current and
deferred tax charge (as opposed to just the current tax
charge under UK GAAP) to the tax charge that would
result from applying the standard rate of tax to the
profit on ordinary activities before tax

3. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 16 Property, plant and
equipment
FRS 15 Tangible fixed assets FRS 15 includes fixed assets ‘held for sale’. Such
assets are not covered by IAS 16, but are covered by
IFRS 5.
When one asset is acquired in exchange for another,
IAS 16 requires the cost of the acquired asset to be
measured at fair value (usually corresponding with
market value).
Like FRS 15, can use cost model or revaluation model.
Unlike FRS 15, IAS 16 requires revaluations to be at
fair value rather than current value. There is also some
difference in treatment of revaluation losses.
Comparison of treatment of depreciation:
• IAS 16 and FRS 15 both require residual values to be
reviewed at each balance sheet date
• IAS 16 requires increases in an asset’s residual value,
based on current prices, to reduce the ongoing
depreciation charge
• If the residual value equals or exceeds the asset’s
carrying value, the depreciation charge is reduced to
zero
• FRS 15 generally requires prices at the date of
acquisition or latest valuation to be used; thus
increases in residual values are generally reflected in
disposal profits rather than in lower depreciation

4. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 17 Leases SSAP 21
FRS 5
Accounting for leases
and hire purchase
contracts
Reporting the
substance of
transactions
• When classifying a lease of land and buildings, IAS
17 requires the land and buildings elements to be
considered separately. Lease of land is usually
considered to be an operating lease.
• Difference in income recognition for lessors
• IAS 17 requires more extensive disclosures than
SSAP 21. The main difference is that IAS 17
requires lessees to disclose the total of future
minimum lease payments; SSAP 21 requires
disclosure only of details of the payments that the
lessee is committed to make in the next year.
IAS 18 Revenue FRS 5 Reporting the
substance of
transactions
FRS 5 is the closest equivalent to IAS 18. No
differences in treatment.
IAS 19 Employee benefits FRS 17 Retirement benefits Re actuarial gains and losses, IAS 19 offers two
options, one of which agrees with FRS 17.
Unlike with FRS 17, pension assets and liabilities
cannot be shown net of any related deferred tax (IAS
12).
If defined contribution accounting is used by group
entities, the allocation of net defined benefit cost
among the participating entities depends on whether
there is an agreement or stated policy.
Re short term employee benefits, IAS 19 includes
accounting for and disclosure of wages and salaries,
benefits, paid leave and bonuses.
IAS 20 Accounting for govt
grants and disclosure of
govt assistance
SSAP 4 Accounting for govt
grants
No differences
IAS 21 The effects of changes in
foreign exchange rates
FRS 23 The effects of changes
in foreign interest rates
No major differences, not relevant to HH

5. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 23 Borrowing costs FRS 15 Tangible fixed assets Where borrowings specifically relate to expenditure on
an asset, IAS 23 takes the actual borrowing costs less
any investment income received from the temporary
reinvestment of unutilised borrowings; FRS 15 takes
interest on the amount of borrowings that has been
spent on the asset to date.
IAS 24 Related party disclosures FRS 8 Related party
disclosures
• IAS 24 does not exempt subsidiaries from disclosing
related party transactions. It also does not include the
FRS 8 exemption whereby the related party
disclosure rules do not apply if this conflict with the
reporting entity’s duties of confidentiality arising by
the operation of law.
• IAS 24 requires disclosure of related party
transactions in the separate financial statements of
parent entities.
• IAS 24 includes management compensation in the
definition of a related party transaction, and has a
wider definition of key management.
IAS 26 Accounting and reporting
by retirement benefit plans
FRS 17 Retirement benefits No differences from existing accounting requirements
for pension schemes

6. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 27
SIC-12
Consolidated and separate
financial statements
Consolidation – special
purpose entities
FRS 2
FRS 5
Accounting for
subsidiary undertakings
Reporting the
substance of
transactions
Mostly similar, but some differences:
• IAS 27 includes guidance on the treatment of
investments in subsidiaries in the parent’s financial
statements, whereas FRS 2 does not
• Where reporting periods of the reporting entity and its
subsidiaries are not consistent, FRS 2 allows
consolidation where the subsidiary’s period end is
within three months of the parent’s reporting year
end. IAS 27 is more flexible, and allows
consolidation where the subsidiary’s period end is
after the group’s period end
• IAS 27 states that the existence and effect of potential
voting rights should be considered when assessing
whether one entity controls another; FRS 2 states that
options are taken into account only when they are
exercised
• FRS 2 requires a subsidiary to be excluded from
consolidation where severe long-term restrictions
substantially hinder the exercise of the parent’s rights
over the assets or management of the subsidiary.
Under IAS 27 control must be lost for exclusion to
occur.
• On disposal of a subsidiary, IAS 27 excludes
goodwill previously written off to equity when
calculating the gain or loss on disposal. FRS 2
requires that goodwill previously written off to the
I&E is included in the calculation of the gain or loss.
SIC-12 agrees with FRS 5

7. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 28 Investments in associates FRS 9 Associates and joint
ventures
• FRS 9 requires an investor’s share of its associates’
operating results be brought into the consolidated
profit and loss immediately after group operating
profit. IAS 28 requires only that the investors
consolidated profit and loss reflect the share of the
results of its investee.
• Where the aggregate of the investors share in all its
associates exceeds 15% of the value of the total
group, FRS 9 requires additional disclosure of the
aggregate of the share in investees turnover (if not
already provided), fixed assets, current assets,
liabilities due within one year and liabilities due after
one year. Additionally where the share of associates
exceeds 25% of the group total the investor should
also disclose the aggregate of the share of investees
profit before tax, taxation and profit after tax. These
requirements do not feature in IAS 28.
IAS 29 Financial reporting in
hyperinflationary
economies
FRS 24 Financial reporting in
hyperinflationary
economies
No differences
IAS 31 Interests in joint ventures FRS 9 Associates and joint
ventures
The only material differences in disclosure for joint
ventures (JVs) is that where the aggregate of the
venturer’s share in all its JVs exceeds 15% of the value
of the total group FRS 9 requires additional disclosure
of the aggregate of the venture’s share in its JVs’ fixed
assets, current assets, liabilities due within one year and
liabilities due after one year. Additionally where the
share in JVs exceeds 25% of the group total the
venturer should disclose the aggregate of its share of
JVs’ profit before tax, taxation and profit after tax. IAS
31 contains no such requirements.

8. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 32 Financial instruments:
presentation
FRS 25
FRS 29
Financial instruments:
disclosure and
presentation
Financial instruments:
disclosure
No differences
IAS 33 Earnings per share FRS 22 Earnings per share Not relevant to HH (company limited by guarantee)
IAS 34 Interim financial reporting ASB Statement Interim financial
reporting
No major differences

9. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 36 Impairment of assets FRS 10
FRS 11
Goodwill and
intangible assets
Impairment of fixed
assets and goodwill
The basic recognition approach is the same, but there
are some differences in subsequent treatment:
• FRS 11 states that impairments of revalued assets that
are clearly caused by the consumption of economic
benefits should be recognised in the I&E, whereas
IAS 36 requires such impairments to be recognised in
the income statement only to the extent that the loss
exceeds the balance on the revaluation reserve
relating to the specific asset
• Impairment losses are first allocated to goodwill then
pro-rata to intangible and tangible assets (vs. UK
GAAP order of goodwill, intangibles and then
tangible assets)
• Under IAS 36, goodwill impairments cannot be
reversed
• Under IFRS, goodwill cannot be amortised. IAS 36
requires an annual impairment review instead
• Both FRS 11 and IAS 36 require that estimated cash
flows from future restructuring/expenditure on
enhancing the asset to which the entity is not yet
committed should be excluded when determining
value in use. However, FRS 11 includes an exception
for newly-acquired income generating units and
permits such cash flows to be included if they were
anticipated at the time of performing the impairment
review in the first full year after acquisition
• IAS 36 does not require recognition of losses that
would have arisen in the past, but which have since
reversed. FRS 11 requires that any past impairment
that should have been recognised is charged when
actual cash flows are substituted.
• IAS 36 requires more extensive and detailed
disclosure of impairments and testing processes than
FRS 11.

10. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 37 Provisions, contingent
liabilities and contingent
assets
FRS 12 Provisions, contingent
liabilities and
contingent assets
No significant differences. FRS 12 contains more
guidance than IAS 37 on the discount rate to be used in
determining the present value of a provision.
IAS 38 Intangible assets FRS 10
SSAP 13
Goodwill and
intangible assets
Accounting for
research and
development
• A wider range of intangible assets is recognised under
IFRS, such as software licences (regarded as tangible
fixed assets under UK standards)
• Under FRS 10, an asset is identifiable when it is
capable of being sold separately from the entity. IAS
38 includes this definition, and also identifies
intangible assets arising from contractual or other
legal rights
• FRS 10 includes a presumption that the useful
economic life of an intangible asset is 20 years or
less. IAS 38 allows that an intangible asset can have
indefinite life, and in such cases need not be
amortised
• IFRS requires annual impairment reviews for
intangible assets with indefinite life. IAS 38 requires
impairment review only if there is an indication of
impairment, or for intangible assets not yet ready for
use. FRS 10 requires that the useful economic lives
of intangible assets should be reviewed at the end of
the 20-year useful life period
• Under IAS 38, research costs must be written off as
incurred, whereas development costs should be
capitalised where particular criteria are met. SSAP
13 allows a choice regarding capitalisation of product
and service development costs.

11. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 39 Financial instruments:
recognition and
measurement
FRS 4
FRS 5
FRS 26
Capital instruments
Reporting the
substance of
transactions
Financial instruments:
recognition and
measurement
There is fundamental change for companies not
applying FRS 26. Under IFRS:
• There are restrictions on stating assets at amortised
cost, broadly only applicable for assets “held to
maturity”, cash, loans and other receivables. Most
other assets reported at fair value.
• Issued debt is recorded at amortised cost, but
embedded derivatives must be separated.
• Some financial assets (debtors, creditors, accruals
including loans, and investments) recognised under
UK GAAP at cost will be shown at fair value under
IFRS. Changes in fair value will be taken to either
Income or Equity.
• Linked presentation of non-recourse finance
arrangements is not permitted under IAS 39.
• There is strict hedge accounting criteria, measurement
and recognition criteria.
• Detailed hedge accounting documentation and
effectiveness testing is required in order to obtain
hedge accounting.
• Foreign currency assets hedged using forwards
cannot be recognised at the contracted forward
exchange rate. The forward and asset are separately
recognised. Hedge accounting may be applied subject
to strict criteria.

12. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IAS 40 Investment property SSAP 19 Accounting for
investment properties
• IAS 40 allows an entity to choose between the fair
value model and depreciated cost for all investment
property. SSAP 19 requires investment properties to
be carried at open market value
• When the IAS 40 fair value model is applied, the
carrying amount is not depreciated. Gains or losses
arising from changes in the asset’s fair value are
recognised in the income statement. According to
SSAP 19, a revaluation gain or loss is recognised in
the STRGL unless it is a permanent deficit (or
reversal) in which case it is recognised in the P&L
• IAS 40 has more extensive disclosure requirements
than SSAP 19
IAS 41 Agriculture No equivalent Not relevant to HH
IFRS 1 First time adoption of
international financial
reporting standards
No equivalent IFRS 1 encapsulates all adoption and reconciliation
requirements for the initial application for IFRS, and as
such must to be followed in full when stating the year’s
opening balances.
IFRS 2 Share-based payment FRS 20 Share-based payment No differences, and not relevant to HH

13. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IFRS 3 Business combinations FRS 6
FRS 7
FRS 10
Acquisitions and
mergers
Fair values in
acquisition accounting
Goodwill and
intangible assets
• Under IFRS 3, merger accounting is prohibited;
business combinations are required to be accounted
for as acquisitions using the purchase method
• FRS 6 does not have scope exclusions, whereas IFRS
3 has several
• When an acquisition takes place in stages, IAS 3
requires that each exchange transaction is treated
separately for the purpose of determining the fair
values of the identifiable assets, liabilities and
goodwill. UK GAAP requires that such assets and
liabilities acquired are measured at their fair value on
the date the investee becomes a subsidiary. However,
the FRS 2 true and fair override is consistent with
IFRS 3
• Under FRS 7, adjustments made to the fair value of
assets and liabilities as at the date of acquisition
should be made in the first full financial year
following the acquisition. This can be longer than the
12 month period allowed by IFRS 3
• Under IFRS 3, adjustments to provisional fair values
should be recognised as if the initial accounting had
been completed at the acquisition date (i.e.
comparatives should be restated). Under UK GAAP,
adjustments to provisional fair values are accounted
for in the period that adjustments are made
• IFRS 3 does not use the term ‘negative goodwill’ and
instead calls it ‘excess of acquirer’s interest in the net
fair value of acquiree’s identifiable assets’. IFRS 3
requires this to be taken into the I&E in the year of
acquisition. UK GAAP requires that negative
goodwill should be classified as such in the ‘capital
and reserves’ section of the balance sheet. Negative
goodwill up to the fair values of the non-monetary
assets acquired should be recognised in the I&E in the
periods in which the non-monetary assets are
recovered (either through depreciation or sale)

14. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IFRS 4 Insurance contracts No equivalent Not relevant to HH, as the standard applies to insurers
rather than policyholders
IFRS 5 Non-current assets held
for sale and discontinued
operations
FRS 3 (part) Reporting financial
performance
• IFRS 5 and FRS 3 have different definitions of
discontinued operations
• IFRS 5 requires a single number to be disclosed on
the face of the income statement. A breakdown of
this figure is required to be given either on the face of
the income statement or in the notes to the accounts.
FRS 3 requires disclosure of the split in the pre-tax
figures on the face of the income statement
IFRS 6 Exploration for and
evaluation of mineral
resources
No equivalent Not relevant to HH
IFRS 7 Financial instruments:
disclosures
FRS 29 Financial instruments:
disclosures
No differences at present. A FRED has been issued for
FRS 29, and the consultation period ended on 30th
January 2009. Outcome of the consultation is expected
shortly.

15. International
Standard
Description Relevant UK
Standard
Description Differences/Comments
IFRS 8 Operating segments SSAP 25 Segmental reporting • IFRS 8 operating segments are defined in terms of the
structure of the entity and how it manages itself. In
the UK SSAP 25 Segmental Reporting identify two
types of segment: classes of business and
geographical segments. Segmental reporting based on
SSAP 25’s classes of business criteria would result in
reporting similar to that achieved under IFRS 8.
• The segmental reporting requirements under IFRS 8
are greater than those under SSAP 25.
• IFRS 8 requires entities to report: segment profit or
loss; liabilities; revenue from external customers;
revenue from other segments; interest revenue;
interest expense; depreciation and amortisation;
material items of income and expense; the entity’s
interest in profit and loss of associates and joint
venture’s accounted for by the equity method; and
income tax expense or income and material non-cash
items other than depreciation and amortisation.
• SSAP 25 only requires entities to report segment:
turnover distinguishing between that from external
customers and that from other segments; results
before taxation, minority interests and extraordinary
items; and net assets.
• The two standards use slightly different criteria to
assess whether a segment merits separate reporting
based on turnover/revenue. SSAP 25 requires this
assessment to be made on third party turnover only
whereas IFRS 8 requires the assessment to be based
on sales to external customers and inter-segment sales
or transfers.

16. GLOSSARY
GAAP – Generally Accepted Accounting Principles
IAS – International Accounting Standard
SSAP – Statement of Standard Accounting Practice
LIFO – Last In First Out
FRS – Financial Reporting Standard
IFRS – International Financial Reporting Standard
HH – Hounslow Homes
SIC – Standing Interpretations Committee (predecessor body to the International Financial Reporting Interpretations Committee, IFRIC)
I&E – Income & Expenditure
STRGL – Statement of Total Recognised Gains and Losses
FRED – Financial Reporting Exposure Draft
SOURCES
Accounting Standards Board – www.frc.org.uk
International Accounting Standards Board – www.iasb.org
Government Financial Reporting Manual – www.financial-reporting.gov.uk
HM Revenue & Customs – www.hmrc.gov.uk
HM Treasury – www.hm-treasury.gov.uk
The Chartered Institute of Public Finance and Accountancy (CIPFA) – www.cipfa.org.uk
IFRS Briefings – Managing the Transition – www.audit-commission.gov.uk
Association of Chartered Certified Accountants (ACCA) – www.uk.accaglobal.com
The Institute of Chartered Accountants in England and Wales (ICAEW) – www.icaew.com
IAS Plus, published by Deloitte – www.iasplus.com
International Financial Reporting Standards, published by KPMG – www.kpmg.co.uk
Public Finance, CIPFA
Accountancy Age – www.accountancyage.com
IFRS: Managing the Conversion, 5th
December 2008, PriceWaterhouseCoopers & CIPFA
International Financial Reporting Standards – The potential impact for housing associations – PriceWaterhouseCoopers & National Housing
Federation