The Association of Corporate Treasurers has today responded to the DTI’s consultation on the ‘Draft Regulations on the Operating and Financial Review’.
In general terms the ACT supports the direction the DTI is going. There are however numerous very important points of detail where we believe changes and improvements could be made.
Two key points the ACT have raised are:
- The burden of introducing the OFR at the same time as International Accounting Standards for listed companies is too great, especially as the reporting standards have yet to be developed by the ASB. Deferment of mandatory OFR requirements is urged.
- The OFR should be subject to the same standards as the rest of the Annual Report. "Due and careful enquiry" seems to set new, higher, levels.
Richard Raeburn, Chief Executive of the ACT, said,
We are strong supporters of better and more responsible reporting and disclosure, but feel that the start of a compulsory OFR should be postponed until the necessary ASB reporting statements have been circulated and subjected to public consultation. Richard Raeburn, Chief Executive of the ACT
Notes to editors
The ACT is supportive of the initiative's aim of providing better standards of reporting on a company's performance and future development, its strategies and risk. However, and in addition to the above points, the ACT believe the following changes and improvements must be made:
- Although much depends on the reporting standards yet to be issued, requirements on content and director liability which is too strict could reduce OFR content to defensive, pointless blandness.
- "Safe harbours" for statements honestly made in good faith should be provided.
- The auditor’s roles should be confined to process – not second guessing Director’s judgements.
- There is a risk that excessive expectations will be raised about the work of the FRRP (Financial Reporting Review Panel). A phased approach to enforcement by FRRP is essential.
- Support is expressed by the ACT for the Government’s approach to CSR and environmental issues.
- Confidentiality provisions similar to those under the Listing Rules should be incorporated – subject to the Listing Rule’s provision that the resultant disclosure is not misleading.
- Excessive requirements for detail could make the OFR confusing and the important points could become unclear.
- The requirements to produce an OFR should be extended to the largest non-listed companies and in due course to all significant public interest bodies.
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