News in Brief - 1 October

SEC to tighten US accounting rules

The US Securities and Exchange Commission this week vowed to tighten its accounting rules covering ‘big bath’ restructuring charges, creative acquisition accounting, ‘cookie-jar’ reserves, ‘immaterial’ misapplications of accounting principles, and premature recognition of revenues. Commission chairman Arthur Levitt said the measures were part of a campaign to improve US accounting standards. Recent scandals where companies manipulated their accounts to keep up with analysts’ predictions threatened to undermine investors confidence in published financial statements, he warned.

Drop GAAR, urges MP Labour MP Stuart Bell has claimed the chancellor’s office is willing to discuss his call to shelve the proposed general anti-avoidance rule. Bell has passed a file to Treasury secretary Dawn Primarolo detailing how the GAAR would blight mergers & acquisitions and inward investment, and affect tax planning at a time when the City was being threatened by a European-wide withholding tax. ‘My recommendation is to leave things as they are,’ said Bell. ‘If the chancellor wishes to close tax loopholes, he should do so in the Budget.’

Andersen Consulting plans $60m centre Andersen Consulting took some of its own advice last week and pledged to open a $60m European shared services centre in Dublin. The centre, due to open in three years’ time, will consolidate a wide range of the firm’s administrative and IT support functions currently performed across the continent. It will also act as a client showcase for its management of such functions.

IT skills found sorely lacking Research by the English ICA has found that accountants are failing to take advantage of information technology. According to ‘A learning strategy for IT’, a guide published by the General Practitioner Board’s IT group, only 3% of accountants can process their clients’ computer records electronically. The guide advises firms to improve their IT skill levels and includes a self-administered proficiency test.

Buy-out activity soars The value of management buy-outs surged in the third quarter despite the slump in other financial markets, according to the latest market survey by KPMG Corporate Finance. The report, which monitors deals valued above #10m, indicates the total value of buy-outs during July to September reached #2.91bn, compared with #2.38bn in the second quarter of this year and is nearly 30% up on the level of deals struck in the same period last year.

Bankers want IASC rethink The president of the British Bankers Association this week warned that the International Accounting Standards Board’s proposals for measuring ‘fair values’ of financial instruments will ‘potentially destabilise the financial reporting base of financial institutions’. BBA president Andrew Buxton wrote to IASC secretary-general Sir Bryan Carsberg to express alarm at the proposed requirement for banks to estimate market prices for non-trading books. The BBA called on the IASC to rethink its commitment to fair value estimates in all cases.

PFI standard terms hunt The Treasury’s Private Finance Initiative taskforce is seeking views on establishing a set of standard PFI contract terms and conditions for a range of sectors. The move follows a recommendation issued by the PFI review. Meanwhile, shadow chancellor Francis Maude has asked the Commons Public Accounts Committee to investigate the government’s decision to apply new PFI accounting rules only to deals signed from January next year.