PracticeConsultingLeader – The price of double standards

Leader - The price of double standards

Hundreds of Rover car workers are about to discover the real impact of accounting standards. While many accountants think standards are an esoteric debating point, workers at Longbridge are about to find out that they can mean the difference between keeping a job and the dole queue.

As we report on page seven, the adoption of German accounting standards has turned the pride of the British motor industry into a liability that could yet make BMW, its German parent, the subject of an unwanted takeover bid. The difference between the results under UK GAAP and under German standards is a cool #230m. Under UK standards Rover made a cumulative profit of #148m between 1994 and 1997 compared to a loss of #363m under German standards.

Tragic though the consequences will be for those who lose their jobs, the disparity has far wider implications.

The introduction of the euro offers the potential of a single European equity market, which could fuel the development of a European economy to rival and quite possibly eclipse the United States. But that will not happen unless accounts are stated on a common basis. The International Accounting Standards Committee has done its work and the core standards are now being considered by the world stock market club, IOSCO. They had better make their minds up swiftly, for the sake not just of the assembly workers of Birmingham but the future of European business as a whole.

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