OFR standard a big step forward
The Operating & Financial Review reporting standard - published by the Accounting Standards Board today - presents the opportunity for a new era of more informative company reporting says ACCA (the Association of Chartered Certified Accountants). The mandatory OFR should now give shareholders a much more rounded view of the entity in which they invest.
Richard Martin, ACCA Head of Financial Reporting said: "The ASB's standard - RS1 - represents a significant improvement in the current situation. The move from a best practice statement to a statutory requirement should increase the provision of an OFR from two-thirds of listed companies to 100%. It will also ensure the presence of a recognisable statement, gathering in one place information that is currently often scattered through a number of different parts of the annual reporting package."
Other advantages identified by ACCA are:
- The specific reference to Key Performance Indicators (KPI) should help ensure shareholders get hard numbers rather than vaguer statements. The disclosure of the basis of calculation of the KPIs should make those numbers more transparent and easier for users to compare with their competitors. The requirement for comparability over time is important to make sure that performance measures do not simply disappear from accounts when they become unflattering.
- The reference to wider measures of a company's performance means that directors will now have to consider the reporting of their key relationships and of the impact of the business on different stakeholders - such as their employees, the environment and on society in general.
But ACCA also identifies a major potential problem with the new standard.
Richard Martin said: "The parameters set by the government for the OFR still risk allowing companies to omit significant items and deal with others by way of bland boilerplate statements. The ASB's standard has not removed this problem so the extent to which the potential improvement represented by the OFR is translated into reality still depends on the attitude of the reporting directors, and on the standards demanded by the shareholders and other stakeholders.
He added: "The OFR reporting standard is framed in terms of principles and does not set out specific requirements, for example in terms of what or how many KPIs should be included. The implementation guidance may be helpful in setting the tone, but could equally become a rigid template. We hope that the market will insist on meaningful disclosures being made."
For more information contact:
Ian Welch, ACCA Head of Corporate Communications
020 7059 5729/07739 862928