ASB targets IT assets
If the ASB implements compulsory reporting, a propaganda war is on the cards.
The Accounting Standards Board alarmed software vendors and Big Five consultancies this week by hinting that it may require companies to detail IT investment in their annual reports, Accountancy Age has learned.
The ASB is holding a review into the need for more extensive IT reporting guidelines and is consulting with accountancy institutes.
The disclosure of current and planned IT investment would highlight expensive and late-running computer projects. Reporting these problems could send share prices tumbling for the companies affected and cause embarrassment to software vendors and Big Five consultancies that prefer to work in a twilight of confidentiality agreements.
Current reporting guidelines only require companies to reveal year-2000 costs, and the ASB is keen to reflect the explosive growth in IT spending.
Reporting standard FRS 10, issued last year, addresses intangible assets but does not require companies to disclose IT assets ranging from PCs to e-commerce investment.
Andrew Lennard, assistant technical director at the ASB, said: ‘We are aware that IT assets are of continuing importance, and our review will emphasise the need for greater clarity when reporting assets. We’re keeping an open mind.’ Lennard added, however, that it had not set a deadline for publishing the findings.
The prospect of compulsory reporting put software vendors and consultants on the defensive. Neil Robertson, MD of Great Plains, the mid-range financial software specialist, warned it would be difficult to agree on a definition of IT investment because it spans so many parts of a business. ‘Do you add extranet site development and consultancy fees to IT spend?’ he asked.
He added that forcing companies to reveal the price of major software implementations could lead to a propaganda war between the Big Five consultancies and their clients if projects overran.
‘It will set the cat among the pigeons if a project goes wrong,’ he said. ‘A consultant might say a company didn’t have the right skills and didn’t make the right investment.’
Nick Griffin, managing partner at Deloitte & Touche management solutions, argued that disclosing IT investment could mislead investors not involved in the complexities of the schemes. ‘You need to understand the full scope of the project, or it wouldn’t be of much use,’ he said.