Anger as OFR falls victim to Brown's red tape blitz
Critics say move will not deliver administrative savings and companies will have to comply anyway
Confusion and fury from across the business community has met Gordon Brown’s
decision to drop the mandatory operating and financial review.
The chancellor performed an astonishing u-turn on Monday at the CBI
conference in what he billed as a drive to reduce red tape. The decision came
just months before listed companies would have started producing the documents.
The move took almost everyone by surprise, including the architects of key
aspects of the OFR reforms, the Financial Reporting Council.
As Accountancy Age went to press, lawyers suggested the move would
be unlikely to have the dramatic effect of slashing OFR work by 80% as the
Treasury claimed.
John Davidson, corporate insurance partner at Lovells, suggested that 80% of
the requirements would remain despite the change. ‘The requirements introduced
for unquoted larger companies in the Companies Act are broadly those that
implement the changes to the EU directive on consolidated accounts made by the
accounts modernisation directive and therefore will not be repealed. They
include a great deal of the substance of the requirements for OFRs,’ he said.
The FRC, meanwhile, issued a terse statement reiterating its view that
issuing an OFR remained best practice in its view, a stark contrast to the
Treasury’s assertion that the document is an unnecessary ‘gold-plating’ of the
EU accounts modernisation directive.
One member of the Accounting Standards Board, the branch of the FRC which has
helped develop the rules over the last decade, added that the EU directive would
in any case necessitate some kind of extended reporting requirements. The member
expressed confusion over what will happen next.
The DTI said on Tuesday that it planned to introduce amendments into the
company law reform bill to remove the OFR requirement, simultaneously pledging
cuts to red tape that it said would save £1bn a year.
AstraZeneca chief financial officer Jon Symonds, an ASB board member,
expressed surprise at the decision.
‘I didn’t think that [the OFR] was terribly controversial so I’m not quite
sure I understand what the rationale behind it is,’ said Symonds. The ASB has
been working with companies to produce OFRs since 1993.