A Basic Understanding Of Accounting In The UK

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A Basic Understanding Of Accounting In The UK

UK accountancy is somewhat different from American accountancy, in that there are more
regulatory standards for accounting in the UK than in America. In America, companies must follow
the Generally Accepted Accounting Principles (GAAP) set down by the Financial Accounting
Standards Board. The UK uses the generally accepted accounting principles as a standard for
preparing accounts by UK Ltd company accountants. However, there are other guidelines
accountants in the UK must consider.

UK accountants must also consider the International Financial Reporting Standards (IFRS) set forth
by the European Union (EU). These international financial reporting standards were developed in an
attempt to streamline the financial reports from UK companies as well as companies in other
European nations. This makes financial reporting easier to understand by everyone. The
international financial reporting standards also allow UK businesses to more easily compare their
financial statements to those of companies in other nations for the purpose of determining
competition and industry standards.

In addition to the generally accepted accounting principles (GAAP) and the international financial
reporting standards (IFRS), UK businesses must also adhere to UK law, such as the Companies Act
1985, as amended by the Companies Act 2006. These UK laws incorporate both GAAP and the IFRS,
as well as other European law. The UK Companies Act 2006 also requires UK companies to file their
accounts with the Registrar of Companies, which makes the financial reports available to the UK and
worldwide public.

The Companies Act 1985 was superseded by the Companies Act 2006, which is now the definitive
guide for preparing accounts by business accountants in the UK. This UK Companies Act 2006
restated in varying fashions the provisions laid down in the Companies Act 1985, and the
amendments of the Companies Act 1989. However, changes are being made to incorporate the
European Union's takeover of financial standards, and the laws regarding international trade and
financial reporting that are now necessary for UK companies to follow. It will also put into codified
law the UK common law that was previously used in regards to UK companies and accountancy.

Any UK accountancy issues that require immediate attention but are not covered by the generally
accepted accounting principles (GAAP), international financial reporting standards (IFRS), or
Companies Act 2006 are brought before the Urgent Issues Task Force. This group determines
solutions to issues of UK accountancy, and publish Abstracts which are binding immediately for UK
companies. These additional standards must also be followed by UK companies.

As you can see, accountancy in the UK is much more complex than that of the United States of
America. There are many UK laws, European Laws, and accounting standards to follow for UK
companies. While Americans must only adhere to the generally accepted accounting principles
(GAAP) set down by the Financial Accounting Standards Board (FASB), UK companies must adhere
also to the International Financial Reporting Standards (IFRS) set down by the European Union. If
you have any question about standard accounting practices for UK companies, you should contact an
accountant firm to help you with your UK accountancy as soon as possible.