TechnologyAccounting SoftwareSpotlight – CGU’s Peter Foster under fire over standards

Spotlight - CGU's Peter Foster under fire over standards

CGU is expected to come under fire from the City next week over the lack of effectiveness of the new insurance SORP in harmonising the accounts of insurance companies.

Finance director Peter Foster will release interim results next Wednesday that are expected to reflect the positive combination of good management and an uplift in life sales but analysts are dissatisfied with the effects of the SORP.

The provision, requiring companies to include long-term investment returns in their profit-and-loss accounts in order to show investment gains well as income, boosted CGU’s annual profits by £200m when they were released in February.

But because each player uses a different method to apply the provision, analysts say that the SORP has failed in its aim of harmonising the wide fluctuations in returns from year to year and so enabling greater comparison between different companies.

‘There is no consistency at all and people do what they want. There is a lack of harmonisation from year to year and across different companies,’ said one analyst with a leading City investment bank.

Critics say this lack of consistency also extends to the application of FRS 13 on derivatives and financial instruments which refers to the disclosure of the assets, liabilities and risks associated with the company’s investment strategy.

However, it also offers guidance in accounting for fair value. Although the fair-value aspect does not apply, CGU has taken the guidance on board for the asset side of the balance sheet, but left the liabilities alone.

Foster, who joined Commercial Union in 1963 and was appointed finance director in 1994, will be pushed to explain the company’s strategy on this standard.

He may well point to the fact that the fair-value requirements are being examined by a joint working party led by international standard setter the IASC which plans to make its findings public in an exposure draft by the end of the year.

CGU is expected to reveal pre-tax profits at the end of the year of around £941m, a 22% increase on last years’ performance.

Related Articles

Sage purchases Intacct in its largest ever acquisition

Accounting Software Sage purchases Intacct in its largest ever acquisition

3m Alia Shoaib, Reporter
5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

3m Alia Shoaib, Reporter
UK behind foreign markets in digital accounting, but gap is narrowing

Accounting Software UK behind foreign markets in digital accounting, but gap is narrowing

5m Alia Shoaib, Reporter
Four reasons why SME owners should switch to cloud accounting

Accounting Software Four reasons why SME owners should switch to cloud accounting

7m Emma Smith, Managing Editor
BDO strikes technology partnership with Receipt Bank

Accounting Firms BDO strikes technology partnership with Receipt Bank

7m Emma Smith, Managing Editor
The rise of the progressive accountant

Accounting Software The rise of the progressive accountant

6m Emma Smith, Managing Editor
Making Tax Digital: Revolution or revolt?

Accounting Software Making Tax Digital: Revolution or revolt?

6m Emma Smith, Managing Editor
Making Tax Digital: Is HMRC’s recent system fault a cause for concern?

Accounting Software Making Tax Digital: Is HMRC’s recent system fault a cause for concern?

6m Emma Smith, Managing Editor