The standard, Reporting the Substance of Transactions, has taken the accounting profession nine years to produce. David Tweedie, the chairman of the Accounting Standards Board, expects it to be controversial. He pointed out that many off-balance-sheet schemes generated significant fees for merchant banks, which sold them to their clients. 'We didn't get many Christmas cards from merchant banks this year', he said.
Previous attempts to outlaw off-balance-sheet schemes have failed because companies and their advisers have quickly found ways around the detailed rules. This standard, however, avoids setting out specific rules but instead sets out general principles and says that companies' accounts should reflect the substance of a transaction rather than its legal form.
'I have a feeling this one could be tested at the edges,' Professor Tweedie said. He said the ASB would use the Financial Reporting Review Panel - the accounting watchdog - and the committee that considers emerging issues to ensure that it is complied with.