Support grows for IAS39

Corporate treasurers, the professionals bearing the brunt of the introduction of IAS39, have thrown their full support behind the standard despite an onerous implementation phase and concerns about some technical details.

Representatives from leading multinational companies Rexam, BP and Philips are in agreement that the new standard has resulted in better disclosure and a more rigorous approach to hedging policies.

‘IAS39 has brought about transparency. Everyone now knows who owns the risk, what is hedged and why it is hedged – that has got to be a good thing,’ said Mark Kirkland, the global head of financial risk and cash services at Philips Electronics.

Chris Bowmer, the treasurer at FTSE100 company Rexam, said that although the standard presented some awkward practical difficulties, it had also revealed a number of embedded derivatives, which had in turn shown some contractual arrangements to be ‘inappropriate’.

‘Achieving the lowest possible funding costs on your desired risk level will be more difficult, but IAS39 does force a more disciplined approach to financial instruments from accountants, management and treasury.’

Robert Johnson, the accounts and control manager at BP Finance, acknowledged that the new standard was creating greater ‘transparency’.

Analysts, meanwhile, also voiced their general approval for the new standard. ‘Preparing for IAS39 is a bit like preparing for a marathon – it’s painful along the way but good when you get there,’ said Peter Elwin, head of accounting and valuation at Cazenove.

‘The systems and personnel costs are painful but at the end of it there will be an accounting standard that is an awful lot better than anything we have had before.’

Sue Harding, European chief accountant at Standard & Poor’s, said the accounting change would bring an ‘added level of rigour’ for assessing the business and financial risks of financial instruments.

COMPANY REPORTS

FTSE100
Brian Wallace, the FD of the Hilton Group, saw his pay increase from £868,000 in 2003 to £1.42m for 2004. Wallace, also the hotel and gaming company’s deputy chief executive, took home £470,000 in basic pay, a £245,000 annual bonus and a further £523,000 from a performance share plan. The group saw its profits before goodwill, tax and exceptionals increase by 41% to reach £383.1m for 2004.

Consumer packaging giant Rexam has seen is profits almost double after restating its 2004 accounts under IFRS. Rexam no longer has to amortise goodwill, which added £75m to its profits after tax, up to £207m from £121m. The group was also affected by changes to its goodwill in reserves, deferred tax, share-based payments and functional currency changes.

FTSE250
Anthony Rabin, FD of PFI building group Balfour Beatty, saw his total pay rise by 13% last year. Rabin’s total pay was up from £361,528 to £409,282, the company’s annual report and accounts reveal. Rabin, 49, has been extensively involved with the group’s PFI business.

Weir Group FD Chris Rickard took home a pay package £304,521 in his first year with the engineering company. Rickard, the company’s second-highest paid director after chief executive Mark Selway, received a basic salary of £304,207, but only £314 in benefits in 2004. Weir Group’s pre-tax profit for 2004, before goodwill and exceptionals, was £58.3m, up 2.8% on the previous period.

AIM
AIM-listed insurance broker the Community Broking Group has appointed Stuart Mollekin as its group FD. Mollekin’s appointment comes after CBG acquired Exius Limited in March, where Mollekin sat on the board. Mollekin has an interest in the group valued at 0.45% of its issued share capital.

James Robinson will become the first finance director of media company Delling, which floated on AIM in October last year. Delling’s chief executive Aksel Bratvedt said Robinson’s previous experience at CLB Corporate Finance would prove ‘invaluable’, as Delling pursued acquisitions as part of its growth strategy.