‘Of all the Accounting Standards Board’s plans to re-shape company financial
reports,’ Accountancy Age wrote in 1992, ‘the operating and financial
review could be the biggest single advance in making accounts useful for the
users of those accounts. If it works, that is.’
Thirteen years on, and that statement has a decidedly odd ring to it. The
opening sentence reads like it could have been written last month rather than
over a decade ago, while the second half simply jars. And after the events of
last week, there’s a very clear answer to the question of whether it will work:
For political commentators, Gordon Brown’s speech at last week’s CBI
conference may have been little more than a sideshow to Tony Blair’s
protestor-disrupted main event. But for the accountancy and business
communities, the 84 words the chancellor devoted to the OFR in his 30-minute
address could hardly have been more significant.
‘Best practice is, of course, for companies to report on social and
environmental strategies relevant to their business,’ he began. ‘But I
understand the concerns about the extra administrative cost of the gold-plated
regulatory requirement that from April next year all quoted companies must
publish an operating and financial review.
So we will abolish this requirement and reduce the burdens placed upon you –
the first of a series of regulatory requirements, which by working together we
can abolish in the interests of the British economy.’
At a stroke he did away with years of planning and preparation with
regulators, businesses and, for that matter, his own civil servants. We can only
wonder what role, if any, his permanent secretary and ex-Peat Marwick consultant
Nick Macpherson played in the affair.
When, as the then head of the Accounting Standards Board, Sir David Tweedie
launched consultation on a new initiative called the operating and financial
review in 1992, he was already revelling in his reputation as the most hated
accountant in Britain.
It was a title bestowed on him by The Scotsman newspaper in recognition of
his efforts to stop any repeat of the scandals that had dogged UK plc since the
late 1980s. But the OFR had garnered a better reception in most quarters – one
of the reasons why the board devoted so much attention to it.
Nevertheless the ASB, now run by Ian Mackintosh, was caught off-guard by
Brown’s announcement. So too was its parent body, the Financial Reporting
Council. In an unusually terse and hastily issued statement, the FRC ‘noted’ the
chancellor’s announcement and recognised ‘implications’ for its work in several
It reminded us all that it still believed in the merits of OFR reports, that
it had been working on the project since 1993 and that many UK companies would
To hammer home its sense of injustice, the FRC suggested the move was ill
thought out. Once ‘detailed proposals’ from government emerged, it said, it
would consider its next step.
Regulators, business groups (although, notably, not the CBI) and
representative bodies have condemned the decision to sacrifice the OFR as part
of the anti-red tape crusade.
But perhaps there’s something in the theory, put forward by arch-cynics, that
it was a shrewd political move. While scrapping the OFR makes Brown look like he
is tough on red tape, most listed companies are so far down the line that they
will continue to produce them anyway.
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