‘I think the clock is ticking,’ says AstraZeneca’s chief financial officer, Jon Symonds. The most influential finance chief in the UK was giving a cautious but pertinent warning to UK plc over the impending arrival of a new dawn in financial reporting.
Just 51 days lie between now and the arrival of international financial reporting standards – time flies when you’re reinventing a decades-old accounting system.
But Symonds, who as well as being CFO of one of the world’s largest pharmaceutical companies is also chairman of the hugely influential The Hundred Group of Finance Directors, is sitting pretty.
Last month, AstraZeneca restated accounts for 2003 and the first half of 2004 under IFRS, in a move that was widely acclaimed in financial circles, and led Accounting Standards Board chairman Ian Mackintosh to lavish praise on the company.
While Symonds is naturally modest, he is under no illusion of the importance his position holds. Restating under IFRS will, he hopes, get accounting standards ‘off the table as an issue’ and let analysts go back to ‘worrying about the things that really matter’. By that, Symonds means ‘business performance management’ and bottom-line shareholder value which, at the end of the day, is what every public company exists for.
But, as chairman of The Hundred Group, 45-year-old Symonds’ role is immensely important, and his example will be widely scrutinised. Despite this, he denies that the decision to restate under IFRS so early was due to a sense of responsibility.
‘I have always wanted to inform the market of things that are important,’ he says. ‘My views on that are the same no matter which hat I have on.’
But there is no denying that the move has provided a huge amount of momentum to IFRS adoption. Symonds says there are more companies due to restate their accounts soon. Slowly but surely, IFRS is becoming a reality of corporate life. So far it has been a painful work in progress. Continuing confusion over controversial financial instruments standard IAS39, outrage from smaller companies at being forced into a regime aimed at larger companies and cross-border arguments have blighted their, so far, limited life.
‘Because of the nature of our business we were able to unpick our way through the uncertainties,’ says Symonds. ‘There is actually quite a lot of space devoted to the assumptions upon which we have built this. For other organisations, some of the changes that are happening quite late make it very difficult to manage and I think it’s put everybody in a very difficult position.’
The uncertainty surrounding some standards and their interpretation has led the Financial Services Authority to allow listed companies to extend the time for interim accounts’ preparation under IFRS to the European Union limit of 120 days.
The FSA highlighted IAS39 as a particular issue for banks and financial institutions. A survey by Accountancy Age last week showed that 43% of respondents had not yet begun preparations for IFRS.’I have an enormous amount of sympathy for financial institutions,’ agrees Symonds.
Indeed, as many observers believe, the interpretation of the new standards is a serious cause for concern among the boardrooms of UK plc.
The news that some of the Big Four’s clients are demanding the involvement of barristers to ensure they are on safe ground with IFRS is worrying.
Symonds insists that AstraZeneca did not involve lawyers at any point in the restatement of its accounts, although he is aware it has been happening.
‘I would always believe that it is within the realms of our expertise, and certainly the expertise that we have within the organisation, to appropriately interpret published accounting standards in the way that complies with the requirements,’ says Symonds.
He claims that AstraZeneca’s IFRS project, which began over 18 months ago, threw up few surprises but this, he says, was down to how well the project was handled by its manager Helen Curran and her team. ‘I have to say that we’re glad we started early,’ he adds.
Symonds is determined to get across the message that IFRS is far more than just a technical accounting issue that should be left to lie ‘in the bowels of the organisation’.
‘This has implications for communication, decision making and organisational behaviour. That takes it a long way from a technical accounting matter,’ he says.
This is evident when you consider that AstraZeneca’s IFRS project involved the training of more than 1,000 of the company’s 60,000 staff. Symonds would not be drawn on the overall cost of the project, describing it only as ‘pretty small sums of internal cost’.
While IFRS is a huge new regime for listed companies to get to grips with, it is just a small aspect of what amounts to one of the biggest overhauls of governance practice in UK corporate history. IFRS, Sarbanes-Oxley, and the Higgs and Smith reports, are all well-intentioned attempts to claw back the image of big business following recent scandals.
Unfortunately, for all but the largest companies, the burden of compliance is proving extremely hard to bear. It is one of the reasons why the FSA gave listed companies more time to prepare interims under IFRS.
Symonds is obviously wary of the compliance burden and seems to subscribe to the school of thought that over-regulation will lead to a stifling of enterprise. ‘I think if you can keep both issues in the right perspective – compliance, but with a keen eye on adding business value – then I think you can just about get away with it,’ he warns.
‘My finance team this year has and will spend a significant amount of their time restating financial statements and documenting controls. That’s time not available for business performance analysis.’
He says that the ultimate cost of the increase in corporate governance and compliance will be carried by the shareholder. ‘It’s important that shareholders and investors get involved in some of these debates, because they are picking up the bill for it.’
Despite the warnings, Symonds makes it clear there are also significant gains to be had from the compliance clampdown. ‘I’ll have a much better-trained financial organisation than I had a year ago,’ he says.
‘Ultimately, I think there are some very real benefits to come from this. If you imagine our CFO in Malaysia. He’s not only got to deal with local statutory accounts in his own language, but he’s also got to report under UK GAAP, US GAAP and international accounting standards. I can see some very real quality benefits coming from him only having to understand one set of accounts.’
Since leaving Big Four firm KPMG in 1997 after 17 years’ service, Symonds finds himself in one of the most formidable positions in the world of business and finance. The Hundred Group is little known in public life, but it is an influential organisation. As chairman, he enjoys unparalleled access to senior figures in Whitehall, the City and Europe.
Indeed, Europe is becoming more and more of a focus for Symonds. The collection of the dozen or so multinationals – which he concedes come from a mainly industrialist background rather than financial or banking ones – ‘lobbied the EU heavily’ over IFRS.
He says the group didn’t want to see ‘compromises in accounting’, adding: ‘I think we’ve all been very clear that we are after a single set of high-quality global standards and have objected to accusations of the politicisation of accounting.’
Recently named the 43rd most powerful business person in Britain by The Times ‘The Power 100’ list, Symonds is also among the youngest. Only one fellow member of the top 50 – Charles Dunstone, chief executive of Carphone Warehouse – is younger than him. In total, there are just three his junior in the entire list. Symonds has plenty of time to climb further. Judging by his hunger for responsibility there is little doubt that he will.
The pressure of being a modern FD
Jon Symonds is a fine example of the all-action finance man. On top of his day job, he holds down a non-executive commitment with drinks manufacturer Diageo, chairmanship of The Hundred Group of Finance Directors, joint chairmanship of the Business Tax Forum, board roles at the ASB… the list seems endless.
But once upon a time, the finance director was the stalwart of the company – first to arrive in the morning, last to leave of an evening, one job for life where he or she would do nothing but analyse numbers for 14 hours a day.
How things change. Now they plan strategy with the chief executive, meet with analysts, fulfil their non-executive commitments, take active roles in pressure groups and analyse numbers for 14 hours a day.
Perhaps this helps explain the unprecedented turnover of finance chiefs in October. Last month alone, 5% of FTSE100 finance directors announced their intentions to leave.
Ken Hydon of Vodafone is perhaps the most high-profile of the recent leavers, having announced his intention to retire from the mobile phone giant after next July’s agm.
GlaxoSmithKline’s John Coombe, will also retire next year, but is already being linked with other high-profile jobs.
These two have been joined by Sainsbury’s Roger Matthews, 3i’s Michael Queen and Whitbread’s David Richardson.
Matthew Key, the 41-year-old chief financial officer of O2 UK, who spoke to Accountancy Age last month, says delegation is the only option if today’s finance director is going to cope with the pressure of the day job. He says his role is very ‘commercial’ and strategy takes up a large amount of his time.
To do this, Key has to have absolute confidence in his finance team, and has introduced a ‘culture of accountability and responsibility’ so that every financial decision does not require his personal go-ahead.
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