Half yearly financial reports
Comments from ACCA
May 2007
The Association of Chartered Certified Accountants (ACCA) is pleased to have this opportunity to comment on the exposure draft (ED) of the Statement on the above subject. The ED was considered at a recent meeting of ACCA's Financial Reporting Committee and I am writing to give you their views.
ACCA's responses to matters specifically raised for comment
Q1. Do you agree with the proposal to re-issue an amended Statement?
No. While we have generally little problem with the content of the ED, we would prefer that the revised Statement was not issued.
Companies quoted on AIM are now in the process of conversion to IFRS. The remaining quoted companies using UK standards are those who have no subsidiaries and therefore do not prepare consolidated financial statements. We support the idea that all quoted UK companies should be required to use IFRS. We consider that this was the spirit of the European Union's policy and that it is a quirk of the EU regulation that they have not been obliged to do so.
In our view ASB should now make clear that any quoted companies should comply with IFRS and not its standards. This would mean that far from revising this Statement, it could be withdrawn along with FRS22 'Earnings per share' for instance. This part of the ASB's convergence strategy could be implemented quite independently of whatever might be done for example in relation to:
- the definition of other publicly accountable entities to whom a similar requirement might potentially be extended, as envisaged in the ASB's statement of May 2006
- privately-held UK companies where the assessment of the IFRS for SMEs may determine the ASB's convergence strategy.
Q2. Do you agree that changes in the Statement should be restricted to those made necessary by the developments outlined in paragraph 5 of the Preface?
Despite our comments above, if a revised statement is produced then we agree it seems reasonable to restrict the changes, for example concentrating on an alignment with IAS34 on interim reporting.
Q3. Do you agree that the Statement will provide useful guidance not only for those issuers required to prepare half yearly reports in line with FSA rules, but any other entities wishing voluntarily to prepare half yearly financial reports?
Yes, though we are not aware of many such entities that do publish such reports on a voluntary basis.
Q4. Should ASB initiate a longer-term project on interim financial reporting?
No, for the reasons given in answer to Q1. We note also that there does not seem any material in this document which sets out the issues such a project needs to address.
Q5. Should the Board consider issuing any guidance on pensions for half-yearly financial reports?
No. While we note that the IAS34 guidance on pensions is not very extensive we do not think that ASB should add to it. FRS17 is broadly compatible with the option under IAS19 that most UK listed companies have taken up. Any ASB pronouncement on pension accounting in interim reports might therefore in effect be seen as an interpretation of IAS34. We also note that these companies are managing to apply IAS34 in this respect and so its guidance appears to be sufficient. We have seen with the Reporting Statement 'Retirement benefits - disclosures' that ASB are gold-plating IFRS requirements. We do not think this is the right approach in principle.
Q6. Are there any other areas on which guidance is needed for half yearly financial reports?
In paragraph 34 of the proposed Statement the interim management report refers to explanations of movements in key indicators. To support this there needs to be statement that Key Performance Indicators should be shown for the half year. This is an area not yet covered by IFRS as their Management Commentary project is still at a preliminary phase.
Richard Martin
Head of Financial Reporting