PracticeAuditSegment reporting row hots up

Segment reporting row hots up

Investors angry that management will have the final authority to decide what aspects of the business to report on

It’s been a long time since companies, investors, accountants and standard
setters got so excited about anything as much as the row over segment reporting.

The investors are spitting mad that the authority to decide on what aspects
of the business to report on, should be given to management. They’re also
perturbed by the removal of geographical segmentation, which they deem is
important to them.

Do their fears reflect a basic distrust of management? That management may
collude with the accountants and eventually report in a way so as to obfuscate
failures that were a direct result of management’s poor performance?

The latest group to beat the drum is the
International Corporate Governance Network
a group in charge of $10 trillion – who argue that the lines of accountability
are being muddied, thus contravening basic corporate governance rules.

Management, however, argue that it is imperative that they report on those
aspects which directly pertain to their actual running of the business in that
fiscal year.

Isn’t that just what investors want anyway? Relevant information that isn’t
overcrowded and burdened by other peripheral facts and figures, that had little
to do with how a company has performed?

It may be the first time that such a clear line has been drawn in the sand,
with the investors on one side, and a smattering of NGOs, pressure groups, and
management and accountants on the other.

Just as the European Commission deferred adopting the standard – which has
already been adopted by the International Accounting Standards Board – the UK
standards board stepped in, in a move, to broker some sort of peace between the
two groups.

Ian Mackintosh, Accounting Standards Board chairman, convened an emergency
meeting, at which those gathered voted for and against the standard.

But the letter Mackintosh will be sending to the EC, will not reflect the
vote of those against.

The ASB’s move was not surprising, in that it is well known for its support
of the standard. But it may not be the honest broker it first appeared to be.

One commentator observed this week that this especially bitter row may have
to do with much more – in the way of traditional stances and mistrusts – than
just IFRS 8.

Charlie McCreevy, Internal Markets Commissioner, has not given an indication
of what they will do on this one.

The ball remains in the EC’s court.

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