A harsh German deal,/b>
Your article ‘Rover trouble was avoidable’ (18 February), comparing UK and German accounting results, is timely. Those of us who have been examining German published accounts have long known their practice is directed to producing a cautious balance sheet, facilitated by tax-allowed heavy depreciation charges, automatic stock, and foreign trade debtor write-downs (with the latter representing a form of export subsidy). As a consequence, harsh rates of corporation tax are applied to lower declared profits than is customary in the UK.
A consequence is that German companies have generally kept dividend payments modest, permitting re-investment.
Harsh accounting tends to create secret reserves year by year, thereby checking the growth of equity reserves, which, in turn, jacks up current return on equity.
Too many City analysts also ignore some huge in-house pension reserves which are, in effect, loans to the business and should be included with debt when calculating gearing.
Martin E Simons, London SW15
Living up to our bad name
As an accountant working in industry, I often feel that the profession gets a bad press. The common opinion is that British entrepreneurs are stifled by penny-pinching, visionless men in suits who ‘know the price of everything but the value of nothing’. The phrase ‘this country is run by accountants’ has become a familiar complaint, rather than it being the proud boast we all know it should be.
I am sure that other accountants in business feel similarly maligned.
Successful inventors, such as James Dyson, complain that accountants do nothing but stand in the way of progress because of their bureaucratic and intransigent attitude. They cannot see further than last year’s financial statements. If you don’t believe me, try telling your bank manager ‘ideas are worth more than money’, as the television advertisement says, when he decides to call in your overdraft.
No wonder clients begrudge paying audit fees. I know I do.
I have always defended my profession. Certainly there are accountants who suffer from commercial myopia, as there will be in any profession, but we are not all like that. A good understanding of accounting issues is essential for running a business. After all, if business is a game, money is how you keep the score.
Therefore my heart sank for two reasons when I read the lead article in Accountancy Age regarding the possible closure of Rover’s Longbridge plant. Due to its depreciation policy, the plant made #91m loss rather than a #20m profit, so it may now have to close. I can only assume that the ‘accountants’ in charge either (a) do not understand that a change in accounting estimate has no effect whatsoever on the true value of the business, or (b) it has taken them this long to realise that the depreciation policy was wrong and the plant has been making a loss for years. Either way, they should base their business decisions upon bricks and mortar (or rather people and cash), not debts and credits.
No wonder ‘accountant’ has become a derogatory term.
Andrew H Denny ACA, Bury St Edmunds, Suffolk
Look at the bigger picture
I was a bit disheartened to read the emphasis placed on accounting standards treatment of, I presume, depreciation when a loss of #91m can be turned into a profit of #20m for the year 1997. Surely the wider picture is that here we have a plant which is almost 100 years old and obsolescent, productivity is low, brand charisma lacklustre, product mediocre and management has no new ideas. I wonder where the #800m spent by BMW to buy Rover has gone in four years. Surely the government should not bail them out, pouring in good money after bad. Perhaps it should be scrapped and a new plant built. Longbridge could diversify away from cars into mini-buses or locomotives.
Nagin Khajuria, London N12
Stick to what you know
Mr Stickney’s contention (‘Letters’, 11 February) that the contribution to the accountancy profession of MP’s Austin Mitchell and Jim Cousins is somehow enhanced by their ‘outsider’ status seems to me to be fundamentally flawed.
Few would dispute that non-accountants have some role to play in providing an objective outlook, but if they have no knowledge of our business, their contribution may be worse than useless. In much the same way as I do not give advice to the BMA on the conduct of clinical operations, I do not expect people with equally little knowledge of the matter in hand to command so many column inches in a professional journal devoted to the accountancy profession.
I have no objection to reading well-targeted criticism in Accountancy Age, and indeed much of the criticism we see elsewhere in your journal is well merited, but the rants of failed politicians with no in-depth knowledge of the subject contribute little to the debate.
Take Mr Cousin’s recent assertions that ‘many trainees’ routinely falsify audit work to avoid working long hours (5 November 1998); or that accountancy training ignores recent auditing scandals; let alone the implication that accountants are not taught derivatives and financial instruments (10 December 1998). For those of us who qualified within the last few years, this is as misguided as it is insulting.
If Messrs Mitchell and Cousins have a real insight into the problems of the profession, perhaps they would like to write about it, rather than treating us to their ignorant prejudices.
Dominic Mathon ACA, London N7
Divine intervention on the road to self-assessment
At the end of January, perhaps pre-empting Glenn Hoddle’s experimentation with different religious beliefs, I wandered into Halifax town centre, since I had heard a new religious sect had opened up in Southgate.
Even though I had already visited my normal place of worship, I felt there was nothing wrong with having perhaps an added injection.
I duly wandered into the building and, sure enough, on the first floor, there was a kind of healing service taking place, with the congregation sitting at tables and mumbling incomprehensibly to Ministers behind desks.
Occasionally, the Ministers referred to their Bible, lettered IRM, and occasionally the congregation broke into song though, unfortunately, I was unable to recognise any of the hymns as coming from either the ‘English Hymnal’ or ‘Hymns Ancient and Modern’.
Eventually, it was necessary to make a commitment, which involved making a declaration in front of the Minister that everything being told was true.
I must admit, I found this a bit overpowering and longed for my earlier solitude.
Eventually my time came in front of the Minister – but I couldn’t do it, and I fled down the stairs and out into Southgate – never again to visit the Halifax tax office!
Peter Broadley FCCA, Halifax, West Yorkshire
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