The government’s drive to reduce the corporate red tape burden by abandoning
the mandatory Operating and Financial Review could be undermined by
international plans for an accounting standard that replicates the review’s
Legislation replacing the OFR with a business review that meets minimum EU
requirements of narrative reporting comes into effect today.
Environmental pressure group Friends of the Earth today applied for a
judicial review of the decision to scrap the OFR after a government letter
failed to quell its concerns. A hearing is expected in mid-March.
The International Accounting Standards Board could render such a battle
irrelevant if discussions over the addition of a management commentary to its
platform of standards come to fruition. ‘Management commentary is essentially
proposing, as part of the IASB framework, something not dissimilar from the
OFR,’ said Tim Copnell, director of KPMG’s audit committee institute.
He added that the discussion paper is ‘very particular about the things that
should be included. Companies who think they can get away without doing a great
deal, have to look at this.’
If a finalised standard was endorsed by the European Union, a management
commentary would become mandatory for EU-listed companies.
Accounting advisers EFRAG this week recommended that the proposals become
mandatory. But Clive Edrupt, a member of the CBI’s company affairs group, said
it was currently seeking the opinions of its members on the paper, but remained
relaxed as long as the proposals resulted in guidance and not rules.
The IASB also played down the potential implications of its management
‘We are a long way from having a standard,’ said Elizabeth Hickey, director
of technical activities at the IASB. ‘This is a discussion paper; no decision
has been made as to whether it will be taken any further.’
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