THE FRC APPROACH TO IMPACT ASSESSMENTS
Our regulatory principles, published in our updated Regulatory Strategy, commit us to:
Target the use of our powers, taking a proactive, risk-based and proportionate approach, making effective use of Impact Assessments (IAs) and having regard to the impact of regulation on small enterprises.
The FRC follows three guiding principles in producing impact assessments:
- The work that goes into the production of an impact assessment should be proportionate to the importance of the proposal that it covers.
- Where a standard is being introduced as a direct response to legislation or regulation, or as part of an agreed policy commitment to adopt international standards of accounting or auditing, the impact assessment should explain the rationale for introducing the standard and should focus on any aspects of the proposed standard which augment the relevant legislation or augment or diverge from the relevant international standard.
- Where appropriate, we are particularly alert to the impact of proposals on small businesses.
Our projects and activities fall into the following categories, and there are differences between the categories as to what is likely to constitute an appropriate impact assessments:
- Influencing EU, international and UK Government proposals. We will encourage those bodies to prepare impact assessment, and we will contribute to those impact assessments.
- Implementing EU, international or UK Government proposals. We will prepare an “implementation” impact assessment addressing the scope and timing of implementation and any elements which augment or diverge from the proposal which is being implemented (eg in relation to the implementation of IFRS).
- Leading the UK debate on the response to an emerging risk/market development. We will consider the rationale for regulation and alternatives to regulation, the first step in the preparation of an initial impact assessment.
- Implementing FRC new regulatory requirements. We will prepare an impact assessments based on the Better Regulation Executive guidelines.
- Proposals to provide or update guidance on existing requirements (eg in updating guidance notes). We will produce an impact assessment based on an appropriate simplified approach.
- Proposals relating to monitoring, enforcement and discipline. For policy proposals, we will prepare an impact assessment. For individual cases, action will be demonstrably risk-based (eg in relation to priority sectors identified by the FRRP or priority areas for inspection identified by the AIU).
- Proposals which do not impose regulatory requirements. We will not produce an impact assessment.
FRC project owners will apply appropriate judgement in each case to ensure that the necessary elements are included.
