The U.K. government's announcement that it will delay using international accounting standards for securitization tax purposes has been met with mixed reactions from industry officials. Many market professionals said the government has still done little to end the uncertainty surrounding derivatives accounting under IAS.
The delay will apply to the tax of securitization companies under international accounting standards and the government will also postpone taxing any restatements in accounts, as a result of the transition to the new standards. The new rules for securitization firms will now start on March 31, 2006 and were previously scheduled for Jan. 1, 2005. The postponement of tax on restatements will apply to accounts published before Jan. 1, 2006.
Derivatives accountants noted the Inland Revenue, the U.K. tax authority, is in a tricky situation because IAS 39 may still be altered by the International Accounting Standards Board, when it meets later this month. "They are really kind of stuck," said Derek Jenkins, a partner at PricewaterhouseCoopers in London. Jenkins said the delay was to some extent helpful, but noted the confusion over IAS 39 in particular will continue to be a big headache for the industry.