Reports of improvements in the accounts

Financial reporting standards are still patchy, writes Roger Trapp
"The best way to tackle financial reporting problems," says the blurb of the recently published latest edition of the Institute of Chartered Accountants' annual survey of UK practice, "is to find out what other companies are doing."

Twenty-six years on from the idea's inception, one might think any problems would have been ironed out and a certain consistency had developed. But, of course, financial reporting - as with the world in general - has moved on, and new issues are constantly arising. As Bill Robertson and David Tonkin say in their preface to Financial Reporting 1994-95, recent years have seen financial reporting in Britain characterised by change. "This has resulted partly from the actions of the Financial Reporting Council and partly from changes in the underlying business environment."

No doubt, the organisers of the Stock Exchange and Chartered Accountants Annual Awards for Published Accounts would hope that they, too, have played their part in bringing about any improvement. Certainly, those involved have detected an improvement in the financial reporting of smaller companies.

Little known as this year's small company winner, Graseby, and its predecessors may be, the list of main award winners since the competition began in 1991 reads a little like the great and the good of British business - BOC, J Sainsbury, Cadbury-Schweppes, Coats Viyella and now BP.

Though predictable, this serves to underscore an important lesson: there are very few top-notch companies in Britain. Whether the measure is quality of management, leadership skills, innovation, stock market performance or financial reporting, the same names crop up because they are the few in the reckoning.

At last week's event at the Mansion House in the City of London, John Kemp-Welch commented on the better balance being seen in financial reporting. It met the reasonable expectations of shareholders without being over- elaborate, he believed.

Guest speaker Sir David Tweedie, the chairman of the Accounting Standards Board, added that financial reporting in Britain had moved back into the international mainstream. But he was especially impressed by the extent to which Graseby and BP made use of the Operational and Financial Review, a voluntary statement to help communication.

All of this may well be true, but there are still many accounts being scrutinised by the ASB's sister body, the Financial Reporting Review Panel, with some having publicly to change their accounts as a result.

Perhaps the best hope is for next year's panel - selected from the investment community, accountancy and law - to pick a less well-known main award winner with the intention of encouraging greater efforts on the part of the great swathe of companies in the middle ground.

Richard Sykes, the prominent commercial QC who chaired the judging panel, pointed out that BP, which yesterday reported profits for the latest financial year, had been chosen on the strength of, chiefly, devoting a full page to corporate governance, good and highly relevant accounting, and relevant figures adjusted in an intelligible way to give US shareholders the information they needed.

But, helpful as this is, it is perhaps more useful to the aspirant company to study the respective lists of "positive qualities" and "features to be avoided". Into the former come such notions as attractive, interesting and lucid presentation and objective discussion and appraisal of the company's performance, financial position and prospects. Among the latter are poor legibility from the use of small print or poor colour contrasts and inadequate links between the accounts section and the rest of the report.

Funny how there is no mention of glossy photographs.

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