Jessica Fino 29 Mar 2017 01:43pm

FRC increases fees on accountancy bodies

Increased audit regulation requirements have pushed up the cost of staffing at the Financial Report Council (FRC), leading to a rise in membership fees on accountancy bodies

The regulator announced an increase in its membership fees on professional bodies by 2.5% in a bid to finance the rise in funding requirements for its work on corporate governance and enforcement.

In its plan and budget report, the FRC said its funding requirement for 2017/2018 will rise from £34.6m to £36m, following a 6.3% increase in core costs.

According to the regulator, this was primarily driven by a rise in staff pay by an average of 1.5%.

It added that staff costs, which represent over two-thirds of its operating costs, will increase by 7.5%.

The expenditure will cover the recruitment of additional staff; ensure the body’s efforts to accelerate the speed of investigations in its enforcement activities; and the reform of the UK's corporate governance framework following publication of the government's Green Paper.

In addition to the 2.5% rise in fees for accountancy bodies, the FRC will also increase levies on preparers by 5%. These will range from a 2.5% increase for those with a market capitalisation below £1bn up to 9.5% for market capitalisations greater than £1bn.

The FRC said that the total amount of the preparers levy for 2017/18 will be £14.8m. The regulator will also aim to collect the UK’s contribution to the funding of the International Accounting Standards Board, which will be £0.9m in 2017/18.

Meanwhile, the FRC said it will continue its work to influence the development of International Financial Reporting Standards (IFRS) over the next year.

In its budget, the regulator said that Brexit could have “significant implications for the adoption of IFRS”.

However, it suggested the application of a single set of high quality global financial reporting standards for all listed companies should go ahead, as investors want comparability when reading company accounts.

“The extent to which the framework for accounting and reporting will need to change will depend to a large degree on the outcome of the UK Government’s negotiations with the EU,” the report said.

The FRC said its priorities for 2017/18 include carrying out a review and updating the UK corporate governance code and promoting its work on corporate culture, and using its role as competent authority for audit regulation to drive improvements in the quality of audit.

Stephen Haddrill, chief executive of the FRC, said, “Restoring public trust in business and ensuring the UK corporate sector is ready for Brexit is our priority.

“Over the coming year, we will invest our resources into reviewing if after 25 years of the UK corporate governance code, changes need to be made.

“We must continue to work hard to promote high quality reports, enhance audit quality and improve the speed and effectiveness of our enforcement activities.

“We are grateful for the constructive feedback we receive from stakeholders which is imperative to our ongoing work to enhance trust in business by promoting trustworthy information and behaviour.”