Recent currency movements have revived interest in the issue once more. Most companies have already moved to average rates but there remains a substantial minority that persists in using year-end rates. This includes Hanson, Rentokil, Smiths Industries and smaller companies such as Blenheim. The effect on their results depends on their year-end - when Smiths finished its last financial year in August sterling was worth more than dollars 1.80 but by the time Rentokil ended its year the pound stood at just dollars 1.50.
Year-end companies remain concerned about the unpredictable effects of swings in the pound's value on their reported figures.
Several would like to switch to average rates in the long term but realise that doing so when it would help their results would be damaging to their reputations. They must warn shareholders in advance.
The remaining year-end lobby argues that averages allow too much flexibility - companies can use monthly, quarterly or weighted averages - and they are hard to reconcile with balance sheets, which are, by definition, drawn up at the year-end.
That said, the appeal of smoothing is such that the minority should announce plans to move with their next set of results.Reuse content