Anger as OFR falls victim to Brown's red tape blitz

Confusion and fury from across the business community has met Gordon Brown's decision to drop the mandatory operating and financial review.

The chancellor performed an astonishing u-turn on Monday at the CBI conference in what he billed as a drive to reduce red tape. The decision came just months before listed companies would have started producing the documents. The move took almost everyone by surprise, including the architects of key aspects of the OFR reforms, the Financial Reporting Council.

As Accountancy Age went to press, lawyers suggested the move would be unlikely to have the dramatic effect of slashing OFR work by 80% as the Treasury claimed.

John Davidson, corporate insurance partner at Lovells, suggested that 80% of the requirements would remain despite the change. ‘The requirements introduced for unquoted larger companies in the Companies Act are broadly those that implement the changes to the EU directive on consolidated accounts made by the accounts modernisation directive and therefore will not be repealed. They include a great deal of the substance of the requirements for OFRs,’ he said.

The FRC, meanwhile, issued a terse statement reiterating its view that issuing an OFR remained best practice in its view, a stark contrast to the Treasury's assertion that the document is an unnecessary 'gold-plating' of the EU accounts modernisation directive.

One member of the Accounting Standards Board, the branch of the FRC which has helped develop the rules over the last decade, added that the EU directive would in any case necessitate some kind of extended reporting requirements. The member expressed confusion over what will happen next.

The DTI said on Tuesday that it planned to introduce amendments into the company law reform bill to remove the OFR requirement, simultaneously pledging cuts to red tape that it said would save £1bn a year.

AstraZeneca chief financial officer Jon Symonds, an ASB board member, expressed surprise at the decision.

‘I didn’t think that [the OFR] was terribly controversial so I’m not quite sure I understand what the rationale behind it is,’ said Symonds. The ASB has been working with companies to produce OFRs since 1993.