Rules that govern a mandatory Operating and Financial Review have finally been published by the Accounting Standards Board, but are still attracting criticism.
The ASB this week issued its definitive standard for companies that have to produce an OFR, which will allow them a large degree of flexibility in how the review is pulled together.
All listed companies in the UK, for financial years beginning on or after 1 April 2005, are required to prepare an OFR, which offers a forward-looking view of the business and addresses the resources, risks and uncertainties that could affect long-term value.
‘The requirement to prepare an OFR should be seen as an opportunity for directors to present a clear and balanced analysis of the strategic position and direction of their business,’ said ASB chairman Ian Mackintosh. ‘This should be of great benefit to many parties.’
Richard Martin, head of financial reporting at ACCA, said the ASB’s standard did not remove problems set by government that risked allowing companies to ‘omit significant items and deal with the others by way of bland boilerplate statements’.
‘The extent to which the potential improvement represented by the OFR standard is translated into reality still depends on the attitude of the reporting directors,’ he added.
Eric Anstee, chief executive of the ICAEW, agreed: ‘The new regime is not perfect, but the ASB and the former DTI have listened closely to constituents and made some important changes to the original proposals.’
Others expect the OFRs to evolve over time as they get used to the requirement. ‘Companies have a year’s grace from FRRP inspection of the OFR, which will give them some time to experiment,’ said Mark O’Sullivan, senior manager of value reporting at PricewaterhouseCoopers.
‘It won’t all happen overnight and there won’t be true comparability right from the start,’ he said.
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