Lost without an OFR

Lost without an OFR

No obligation for 'big picture' corporate reporting without OFR

Much criticism has followed the chancellor’s unilateral decision to scrap the
operating & financial review, both in terms of the move itself and the lack
of due process involved. But what happens now?

ACCA disagrees with the government’s view that the business review is an
adequate alternative. It will not give the reader the forward-looking
information which the government says it wants to see big companies reporting.
Companies will be under no obligation to provide important ‘big picture’
information for a variety of stakeholders.

This was the whole point of the OFR. Done properly, it would have given a
comprehensive picture of the company’s objectives, achievements, prospects and
risks, all in the context of its operating environment and stakeholder
relationships. It is a much stronger document than the limited business review.

And the groundwork has already been done. The Accounting Standard Board
produced an excellent reporting statement last year. So why not use it?

ACCA’s view is that companies should be given a formal option to publish an
OFR. This would take advantage of the ASB’s well-developed OFR reporting model.

From the government’s perspective, this would have the advantage of not
requiring legislation setting out the detailed form and content of OFR
statements. It would therefore be consistent with the chancellor’s deregulatory
agenda. The advantage is that companies opting for an OFR would be doing so with
reference to settled professional guidance, which the business review currently
lacks.

Having an acknowledged benchmark of good reporting practice would solve the
problem of inconsistency, which has been the flaw in the OFR regime ever since
the ASB’s original 1993 guidance. Companies would be free to choose a business
review, however, and the market would then make its mind up about companies’
relative reporting choices.

The government says it is still supportive of forward-looking reporting. We
believe that giving companies the OFR option would be proving that.

Allen Blewitt is chief executive of ACCA

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