GIBRALTAR
SOCIETY OF ACCOUNTANTS
EXPLANATORY FOREWORD TO GIBRALTAR
ACCOUNTING STANDARDS
Introduction
1. This foreword explains the authority, scope and application of Gibraltar Accounting Standards (GASs) issued by the Gibraltar
Society of Accountants (GSA) and the circumstances whereby other
internationally recognised accounting standards may instead be followed. The
scope of GAS extends to entities
licensed or authorised by the Financial Services Commission (“FSC”) unless the
applicable legislation requires or the FSC permits the adoption of alternative
accounting standards. This foreword also considers the procedures by which the
GSA issues GASs and their relationship to accounting standards adopted or
issued by the Accounting Standards Board (ASB) in the United Kingdom.
Accounting Standards in the
United Kingdom
2. Accounting Standards issued by the ASB are “accounting
standards” for the purpose of United Kingdom legislation which requires
accounts, other than those prepared by small or medium sized companies (as
defined by the UK Companies Act), to state whether they have been prepared in
accordance with applicable accounting standards and to give particulars of any
material departure from those standards and the reasons for it.
3. In addition the Consultative Committee of Accountancy Bodies
(CCAB) is committed to promoting and supporting compliance with accounting
standards by its member bodies and by their members, whether as preparers or
auditors of financial
information.
4. United Kingdom accounting standards, however, are not intended
to apply to financial statements of overseas entities prepared for local
purposes.
Gibraltar Legal Requirements
5. The GSA notes that Gibraltar Company law makes reference to,
but does not define, the terms „Appropriate Accounting Standards‟, „Generally
Accepted Accounting Principles‟ and „Accounting Rules‟ (collectively referred
hereafter as “GAAP”). In absence of any statutory definition of GAAP, the GSA
recommends that members follow the recommendations set out in paragraph 8
below. In addition Gibraltar Company law permits the use of International
Financial Reporting Standards.
Authority
6. The GSA, whilst recognising that it does not have the authority
to require its members to observe a particular GAAP, wishes to promote a formal
framework for the preparation of accounts.
7. The GSA also notes that, commensurate with Gibraltar‟s status
as an international offshore finance centre, there will be circumstances
whereby internationally recognised accounting standards will be more
appropriate. As mentioned in paragraph 5 above, Gibraltar Company law
specifically permits the use of International Financial Reporting Standards.
8. Therefore, the GSA strongly recommends that its members who
assume responsibilities in respect of financial statements do observe GASs or,
where appropriate, follow instead internationally recognised accounting
standards, as referred to in paragraph 11 below, whether in their capacity as
preparers or auditors of financial information.
Scope and application of
Gibraltar Accounting Standards
9. The GSA consider that GASs are applicable to the financial
statements of Gibraltar reporting entities that are intended to give a true and
fair view of the state of affairs at the balance sheet date and of its profit
or loss (or income and expenditure) for the financial period ending on that
date. GASs need not be applied to immaterial items.
10. Financial
statements are
normally prepared and presented annually and are directed principally toward
the information needs of an entity‟s shareholders, proprietors or equivalent
body of persons.
11. Where these information needs are such that they would be
better met through the use of standards other than GASs then it is entirely
appropriate to depart from GAS and a local entity‟s financial statements may in
such circumstances be prepared in accordance with internationally recognised
accounting standards such as International Accounting Standards, UK GAAP or US
GAAP.
Compliance with accounting
standards
12. Accounting standards are statements of how particular types of
transactions and other events should be reflected in financial statements, and
are formulated with the objective of ensuring that the information resulting
from their application faithfully represents the underlying commercial
activity. The GSA envisages that only in exceptional circumstances will
departure from the requirements of GASs (or where appropriate internationally
recognised 5accounting standards) be
necessary in order for financial statements to give a true and fair view.
13. In applying accounting standards it is important to be guided
by the spirit and reasoning behind them. The spirit and reasoning are set out
in the individual GASs and are based on the ASB‟s Statement of Principles for
Financial Reporting.
14. If in exceptional circumstances compliance with the
requirements of a GAS is inconsistent with the requirement to give a true and
fair view, the requirement of the GAS should be departed from to the extent
necessary to give a true and fair view. In such cases informed and unbiased
judgement should be used to devise an appropriate alternative treatment, which
should be consistent with the economic and commercial characteristics of the
circumstances concerned. Particulars of any material departure from an
accounting standard, the reasons for it and its financial effects should be
disclosed in financial statements.
The issue of Gibraltar Accounting
Standards
15. The GSA has agreed to formally adopt United Kingdom accounting
standards as issued by the ASB, which will be accompanied by Interpretative
Notes (ITN's). The principal purpose of ITN‟s is to cite the recommended
practice in situations where Gibraltar and United Kingdom legislation conflict
and also in situations where reference is made in the ASB‟s accounting
standards to United Kingdom legislation and no corresponding Gibraltar
legislation has been enacted.
16. The ITN, issued by the Society, together with the ASB‟s
accounting standard is referred to as a Gibraltar Financial Reporting Standard
(“GFRSs”) or Gibraltar Statement of Standard Accounting Standards (“GSSAPs”).
GFRSs together with GSSAPs are collectively referred to as Gibraltar Accounting
Standards.
17. GASs are circulated as an exposure draft by the GSA‟s
Technical Committee. An exposure draft is published to allow an opportunity for
all interested parties to comment on the proposals and for the Technical
Committee to gauge the appropriateness and level of acceptance of those
proposals.
18. Although the Technical Committee weighs carefully the views of
interest parties, the ultimate content of an ITN must be determined by the
Committee‟s judgement, in conjunction with the Society‟s President, based on
research, public consultation and careful deliberation about the benefits and
costs of providing the resulting information.