Conservative spokesman Henry Bellingham said the red tape would add £132.2m to costs, when the government could have proceeded by ‘enthusiastically’ implementing an EU directive modernising company requirements alone. Bellingham said the regulations would be ‘a consultant’s dream’.
‘Every quoted company will have to employ new consultants, and will need new advice,’ he said.
‘By implementing the modernisation directive and introducing a statutory OFR for quoted companies – going the Full Monty as it were – the government has gone too far.’
Industry minister Jacqui Smith said the government had reduced the burden of OFRs by simplifying audit requirements, addressing duplication of reporting requirements, avoiding unnecessary publishing costs and giving companies more time to manage the transition.
She said it was necessary to have both the directors’ report and the OFR because their purpose was different with the directors’ report providing a snapshot of a company and the OFR containing information about the strategies and policies for long-term success needed to ensure sound corporate governance.
She said the OFR would be a balanced and comprehensive analysis of the development and performance of a company’s business with trends and factors likely to affect future performance.
Auditors must state in their report whether in their opinion the OFR is consistent with the company’s annual accounts and whether any information has come to their attention inconsistent with them, the minister said.
Enforcement is being delayed a year to enable companies to become familiar with the new arrangements and the role of the financial reporting and review panel will apply to OFRs from 1 April 2006.
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