ScotPower wants US GAAP

ScotPower wants US GAAP

ScottishPower's chief executive Ian Russell is considering reconciling his accounts to US GAAP because the use of UK accounting standards is putting his company at a disadvantage compared to US rivals.

Difficulties in the US that hit ScottishPower’s US business, Pacificorp, culminated last month in a surprise profit warning which wiped around £1bn off the group’s stock market value.

Russell, a chartered accountant, claims the trigger for the warning came after his company was forced to make an announcement concerning losses in the US on forward energy contracts – a loss which his counterparts could simply carry on the balance sheet under US accounting rules.

‘Under UK GAAP, we have to write off any loss in the market price [of energy] now and then seek to recover it through the regulatory process at least in part in the future,’ he said.

‘Under US GAAP, you are able to carry that charge on the balance sheet as a deferred asset and match any recovery against the asset in future periods.’ Russell added that because it is unable to carry losses forward, ScottishPower stands out from its US peers.

‘[Moving to US GAAP] is something we are going to have to look at because it is uncompetitive for us to use a different set of accounting standards to our rivals,’ he said.

Pacificorp’s latest warning stemmed from last year’s Californian energy crisis, which caused forward energy contract prices to rocket.

Under US law, power companies are obliged to meet their supply obligations. Pacificorp, along with rivals, paid dearly to ensure blackouts would not be repeated.

But demand fell rapidly over the summer. Russell explained that under normal market conditions, he would have been able to sell excess power back into the market, but the sharp fall in demand meant he had to announce a Pounds 249m loss on electricity trading to the stock market.

Links

US GAAP could rule the world

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

2m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

3m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

4m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

4m

Related Articles

Financial reporting – a new era beckons for professionals, directors and their insurers

Audit Financial reporting – a new era beckons for professionals, directors and their insurers

1w Rebecca Smith, Partner
KPMG slapped with $50m fine over past audit work

Audit KPMG slapped with $50m fine over past audit work

1w Tom Lemmon
Audit of the future

Audit Audit of the future

2w Andy Turner, Audit and Business Advisory Partner
PwC audit changes are “unacceptable”

Audit PwC audit changes are “unacceptable”

3w Tom Lemmon
PwC reveals “big deal” tech plan to boost audit quality

Audit PwC reveals “big deal” tech plan to boost audit quality

3w Dave Beach
ICAEW: Companies House data a “gaping hole in AML defences”

Audit ICAEW: Companies House data a “gaping hole in AML defences”

3w Dave Beach
Grant Thornton to up audit quality with new appointment

Audit Grant Thornton to up audit quality with new appointment

3w Dave Beach
Goldman Sachs chooses Mazars for audit – but does it really matter?

Audit Goldman Sachs chooses Mazars for audit – but does it really matter?

1m Tom Lemmon