The accounting standards tardis

While accounting standards setters bleat about transparency in financial reports, UK corporates are having to change the rules every year to keep up with them.

Deloitte’s new ‘Measuring by Halves’ study of half yearly financial reporting found that three quarters of companies reported accounting policy changes in 2009-10. The changes were attributed to the adoption of a new accounting standard on segmental reporting.

The auditor said: “Annual financial reporting is like watching Dr Who. It seems that every year the rule changes mean that regeneration is needed”.

The figures also revealed that the average reporting time span had reduced year on year from 50 days in 2008, to 48 days. In both years, larger companies reported more quickly than the middle and smallest 350 groups. Many companies gave additional information not required by the DTR, for example on key performance indicators (KPIs) or forward looking statements.

Other key findings for the report included:

• 95% of companies included a responsibility statement in their half-yearly results announcements, with 87% including all of the content required by the DTR.
• 21% of companies provided the required information in their interim management reports (IMR), an increase from the 10% reported in 2008.
• 33% of companies reporting under IFRS 8 met the increased level of segmental analysis required in half-yearly financial reporting.

The survey assessed 100 companies and 30 investment trusts (companies classified by the London Stock Exchange as being industries of equity or non-equity investment instruments).

Isobel Sharp, audit partner at Deloitte, commented: “The trend is one of continuing improvement as companies become more familiar with the DTR requirements. The trend for accounting policy changes also continues. The status quo is not an option. In 2010, companies making acquisitions will be required to apply IFRS 3 (2008) with its increased disclosure in both annual and half-yearly financial reports.

“Going concern and liquidity risk continue to be issues for many companies in these uncertain times.  Previously, there has been limited explicit guidance on how this should be dealt with in half-yearly financial reports.  The FRC guidance published in October 2009 offers clear pointers to directors in both assessing going concern at interim reporting dates and making appropriate disclosures in half-yearly financial reports.  This will be of interest to many preparers of half-yearly reports in 2010.”

Sharp hit a razor edge when she said ‘the trend for accounting policy changes continues. The status quo is not an option’. It seems that not a day goes by without a new consultation on amendments to financial reporting standards crossing the AccountingWEB desk. With an increasingly competitive trading environment to contend with, has UK industry had its fill of new standards? I’ll leave that one for you accountants to answer!