A raft of criticism has been levelled at the proposed accounting standard for the operating and financial review just as the standard-setter is rushing to finalise details before regulation that comes into force in April.
The Accounting Standards Board’s consultation period on its draft OFR standard closed on Monday with a host of issues being raised by the accountancy industry, and fiercer criticism from outside the profession.
‘The ASB has failed to reflect the secretary of state’s intention to embed in law the concept of enlightened shareholder value,’ said Angela Baron, organisation and resourcing adviser at the Chartered Institute of Personnel and Development.
Baron said the failure of the ASB to give sufficient weight to the key role of human capital in determining organisational performance meant ‘investors will lack one of the most important sources of information to guide their investment decisions, and the country as a whole will lose out’.
Elsewhere, the comments on the standard were varied, with some institutes taking very different views on similar issues.
CIMA argued that the requirements to include information that will enable investors to understand key performance indicators could add significant amounts of text to the OFR, and risk obscuring the crucial information that shareholders require. Chief executive Charles Tilley added that reform of the directors’ liability regime was required if the OFR was to avoid becoming a box-ticking document.
ACCA chief executive Allen Blewitt said: ‘We were disappointed that the government required only that directors include information that they believe is material to investors – this is a green light to leaving out issues that many stakeholders would find important.’
He called on the ASB to tell companies that OFR disclosures should be of a high standard and not just to the extent of complying with regulations.
ICAS director of accounting and auditing James Barbour said the institute was concerned about a ‘lack of linkage’ between the language used in the government regulations and the OFR standard. He called for the ASB to rewrite the standard to clarify these language issues to avoid companies unwittingly breaching the regulations.
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