Tech firms face accounting reforms

Up to 10 per cent of UK companies may have to adopt tough accounting policies that drastically reduce their reported sales, under new measures being considered by the Accounting Standards Board. The move follows the recent furore over the way some hi-tech companies report turnover.

In a discussion paper out today, the ASB says variations in the timing of revenue recognition have emerged as the services and hi-tech sectors have grown. The ASB aims to establish best practise on the issue.

Mary Keegan, the ASB chairman, said: "At the end of the spectrum companies are booking revenues on the basis of shaking hands." She estimated that up to 1 in 10 companies might need to make its accounting more conservative, but said the UK would not adopt strict US accounting standards.

Cedar Group, the software firm, moved to US accounting this month. Last year, an analyst sent its shares plunging by questioning its revenue recognition.