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ASB issues guidance for producing a voluntary OFR

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27th Jan 2006
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The Accounting Standards Board (ASB) has issued a Reporting Statement, 'The Operating and Financial Review' (OFR) in the wake of the Government's decision to withdraw legislation making the OFR compulsory.

The new document is a statement of best practice, based on the now withdrawn Reporting Standard 1 (RS1). The statement is intended to guide companies in producing a voluntary OFR.

Although the move has been welcomed, there are concerns that it will lead to duplication and confusion, because companies who voluntarily produce an OFR must also prepare a Business Review in the Directors' Report, in line with the 2003 EU Accounts Modernisation Directive.

"As the law stands, companies following this best practice route must also duplicate that information within their Directors' Report," says Richard Carpenter, Development Director ' Corporate Reporting at Consultants Radley Yeldar. "That is quite clearly a ridiculous, costly situation that needs to be clarified as a matter of urgency."

Carpenter adds that companies are more likely to properly communicate key messages outside the "legal, tick-box restrictions" of the Directors' Report. "If the Government is truly committed to cutting red tape and saving companies money then it should simply allow them to cross-reference to this information in other parts of the document."

Another concern, which was raised this week by a group of investors and expert organisations, is that the new statement of best practice does not address the requirement to produce a Business Review in line with the Accounts Modernisation Directive. As reported on AccountingWEB, the group has written to Alan Johnson, DTI Secretary of State, asking the Government to indicate which provisions of the ASB's statement of best practice it considers key for satisfying the statutory reporting obligations for a Business Review.

The ASB's Reporting Statement can be downloaded from the ASB website.

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