ASB three-prong report under fire

The English ICA’s financial reporting committee has launched a last-ditch effort to dissuade the Accounting Standards Board from promoting a three-part performance statement covering trading, financing and other gains and losses.

Unveiling the institute’s ‘Financial Performance – Alternative Views of the Bottom Line’ report this week, financial reporting committee chairman Robert Hodgkinson said the committee thought distilling accounts information into a single, three-prong performance statement was a ‘bad idea’.

Hodgkinson was responding to ASB chairman Sir David Tweedie’s commitment to write such a statement into FRS3 as part of his mission to link UK standards to the growing international consensus.

In his contribution to the Financial Reporting Council’s annual review, published last week, Sir David made it clear the proposal would feed into the ASB’s review of FRS3: ‘Reporting Financial Performance’.

In a three-part statement, ‘people, being people, will tend to look at the trading figures,’ Hodgkinson said.

The institute’s paper is intended to set a ‘broader context for the FRS3 review’ and meet the needs of ordinary users of accounts as well as sophisticated analysts, he said. It proposes a ‘current business-value’ model where managers of listed companies address underlying measures of performance that include cash flows, historical costs, current valuations of businesses and assets and market capitalisation.

The committee sought to accommodate both historical cost and current value accounting principles, both of which provided valid perspectives on performance, he added.

‘Rather than arguing about how many statements to have and arcane accountancy points like recycling, we attempted to think about the fundamentals of what should be in annual reports,’ said Hodgkinson.

Hodgkinson admitted the report would be unlikely to change the direction of international standard-setters, but added: ‘Hopefully we will have some influence.’

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