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Comments from ACCA
June 2005

ACCA is pleased to comment on the above consultation document. We address only the first two questions posed.

Q1(a) Do you agree with the policy that we extend to all classes of company the option to send SFS?

We accept that extending the current entitlement to send out summary financial statements (SFS) may offer practical benefits to directors and shareholders in large private companies and AIM-registered public companies. In such companies, users might benefit from receiving annual accounts which were presented in a more concise format. We therefore support the principle of extending the current provision on SFS more widely. This being said, expectations of substantial cost savings from the reform should not be raised too highly. In large companies, the costs involved in preparing the accounts are often greater than the costs of printing and distribution. Accordingly, companies interested in taking advantage of the proposed reform would have to balance the cost savings they think they might achieve against the costs of preparing another statement.

We would not expect reform to offer any practical benefits to smaller private companies. There would be few if any cost savings for them in preparing and distributing a SFS and little likelihood of shareholders deriving any real advantage from receiving a SFS rather then the full accounts. For these reasons we would not expect any significant number of them to take advantage of the proposed reform. We also see a potential source of confusion, for shareholders and other users of company information, in the addition of another type of statutory accounting statement to join the full accounts and abbreviated accounts (which the recent DTI White Paper announced would be retained) that already exist. This point aside, we can see no valid technical reason why the option should not be extended to smaller companies along with other companies. While few smaller companies are likely to be interested, we believe that each should be entitled to make its own decision as to whether or not to take advantage of the new option.

Clearly, whenever any company proposes to distribute a SFS rather than its full accounts, the agreement of individual shareholders to receive the SFS must be obtained.

Q1(b) Do you agree that this option should only be available for accounts that have been audited?

We agree that shareholders would receive more protection if the option to send SFS were made available only to companies which had been audited. But we query the rationale behind restricting SFS in this way. Following the recent increase in the audit exemption threshold, the law no longer requires the interests of shareholders in small private companies to be protected via an audit of their full accounts. It would seem to us illogical if eligibility to distribute a SFS were made dependent on fulfilling a criterion which was not mandatory for the full accounts.

Q2 Do you agree with the proposed approach to the presentation of SFS based on IAS accounts?

We consider that the existing IAS framework for the preparation of ‘condensed financial statements’ is suitable for application to the preparation of SFS by companies which have adopted IAS in their full accounts.

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