Leader - Standing up for financial reality

There is a popular misconception abroad that accountancy and financial reporting are all about telling the truth. Accounts and accountants are often damned for either deliberately hiding the truth or at least for failing to tell the whole story. Chief among those implying that there is some kind of objective financial truth have been members of the present government and backbench MPs.

So how can it be, then, that the Treasury is using all its considerable powers to undermine a brave attempt to tell the truth about the financial arrangements that underpin partnerships between the private and public sectors?

The Accounting Standards Board is coming under a concerted, and for the most part covert, assault by Treasury ministers and officials for its stance on the Private Finance Initiative. Its greatest crime, in the eyes of the government, is to suggest that accounting for PFI projects should try to be as honest as possible about where the real risk of the project lies.

This was always a bold hope by the ASB. The PFI, dreamed up by the Tories and enthusiastically taken up in power by Labour, is the original off-balance sheet scam. Public assets are transferred to the private sector which then spruces them up and runs them for the public sector on a pay-as-you-use basis. At the end of 20 or 30 years, the assets then revert to the public sector. In the meantime, all the costs, apart from the annual service charge, are off the Treasury’s books.

Accountants, as professional sceptics, know that there is no such thing as one financial truth. But the ASB deserves the support of the whole profession for daring to stand up for reality. Because, ultimately, presenting financial reality is what good accounting is all about.