ICAEW Conference - Reporting must change

A leading technical accountant warned colleagues at the English ICA conference on Tuesday that accountancy had reached a crossroads and would have to adapt to new reporting and performance measurement requirements.

Deloitte & Touche technical partner Ken Wild, who also serves on the Accounting Standards Board, warned the audience they needed to accept that accountancy was rapidly ‘moving sideways’.

The shift was reflected in the ASB’s workload, suggested Wild. ‘In many ways, we are moving into a middle phase,’ he said. ‘The early phase was a response to the 1980s and sought to close off scams such as “big bath” provisions and off-balance sheet gains.’

According to Wild, the ASB’s financial reporting standards have tackled those issues and the board has moved on to ‘add-on’ standards covering derivatives, the Private Finance Initiative, pensions, deferred tax and other, more abstract subjects.

‘These issues all raise the question of what is performance,’ said Wild.

‘The ASB gave it added significance when it introduced the STRGL (statement of total recognised gains and losses). Value changes are important, but as the emphasis moves away from the profit and loss figures, how do you look at performance? What is your measure and how do you reflect it in performance statements?’

According to Wild, the STRGL will be the focus of any new approach. Accountants will need to refine the performance statement around operational and holding gains and losses.

Wild’s call for flexibility and new thinking received support from Stakis Group financial director Neil Chisman, who identified himself as a supporter of the current value accounting practices set out in recent FRSs and international standards.

‘Some FDs say there’s too much change, that compliance is too vigorous and that these standards will hurt earnings per share. I don’t believe any of those things,’ said Chisman.

‘I believe preparers are taking a reactive and short-sighted view. The arguments about international harmonisation are not well understood but most of all the debate about principles is getting in the way.’ In the future, he added, companies will report shareholder value creation.