Slowly moving towards reducing the amount of reporting that “micro-entities” have to undertake
24 March 2012
Financial reporting for the smallest businesses: Government will consult on taking advantage of the new European regime
19 March 2012
Bank audits: Challenges by the auditors to the audit committee
ICAEW suggests that auditors’ questions to the audit committee about key accounting judgements should be made public
19 March 2012
Guidelines Monitoring Group report on good practice reporting by private equity portfolio companies
Improving transparency and disclosure by large private equity portfolio companies
14 March 2012
Executive pay: Government proposes that annual binding vote will need “supermajority” to pass
Consultation launched on the detail of the Government’s proposals on executive pay
1 March 2012
Healthcare Locums fiasco: US hedge funds to sue company and three former directors
Latest development in tale of AIM company’s serious accounting regularities
23 February 2012
European directive adopted on the accounting and financial reporting requirements of micro-enterprises, now needs to be transposed into national law
Directive aims to ”relieve micro-enterprises from red tape”
UPDATE 24 March 2012: Following the EU’s adoption of the Directive on micro-entity reporting in February 2012, the Government has now announced that it intends to take advantage of the new EU regime and will consult on implementation in due course. See this post for details.
The Council of the EU and the European Parliament on 21 February 2012 adopted a “Directive on the annual accounts of certain types of companies as regards micro-entities“. From the Council’s press release:
“The new provisions have the potential to significantly reduce administrative bureaucracy for those companies not exceeding the limits of two of the following criteria: a balance sheet total of EUR 350 000, a net turnover of EUR 700 000 and an average of ten employees during the financial year.
The directive will allow EU member states to exempt micro-enterprises from the publication of annual accounts. This optional exemption will be compatible with national obligations to keep records showing the company’s business transactions and financial situation.”
The Directive will come into force on the twentieth day following its publication in the Official Journal and EU member states will then have to transpose the Directive into their national law.
Simpler financial reporting for the smallest businesses?
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19 February 2012
The audit committee and the board’s responsibilities to shareholders
Discussions and insights with leading audit committee members
9 February 2012
Fundamental overhaul of UK GAAP: “A single book that sets out clear, concise and cost-effective accounting requirements”
Proposals from the ASB on the future of Financial Reporting Standards
2 February 2012
Deloitte reported for conduct over MG Rover and the Phoenix Four
Deloitte and former Deloitte partner to be investigated by the AADB for conflicts of interest and self-interest
23 January 2012
Government proposals on executive pay: Consultation on shareholder binding vote, no employee representation on remuneration committees
- Listed companies to publish single pay figure for each executive director
- Pay and pay offs may be subject to shareholder vote; consultation to determine scope and type of vote
- Serving executives to be limited from other companies’ remuneration committees
- UK Corporate Governance Code to be amended to allow clawback of pay
- Remuneration reports to be split into “past pay” and “future pay” sections
The Business Secretary today set out in Parliament (ahead of a formal launch tomorrow) the Government’s plans for more transparency in, and greater shareholder control over, executive pay at listed companies. The principal measures announced in the Business Secretary’s speech are set out below.
UPDATE 25 January 2012: The Department for Business, Innovation and Skills has now published information about the Government’s proposals on its website.
17 January 2012
Disclosing increased country and currency risk: FRC guidance for listed companies
Regulator’s update prompted by “the current economic uncertainties facing a number of countries around the world”
The Financial Reporting Council has today published “An update for directors of listed companies: Responding to increased country and currency risk in financial reports” (the Update).
The FRC has issued this Update to highlight significant issues that directors may address “when considering how best to provide a balanced and understandable assessment of a company’s position and prospects in the context of increased country and currency risk” in annual and half-yearly financial reports. The Update sets out various codes and regulations – including the UK Corporate Governance Code, the Listing Rules and IFRS – that may require a company to make these risk-based disclosures. The accompanying FRC press release is here.
The update specifically mentions the risks arising from regime change in the Middle East, the funding pressures on “certain European countries” and the curtailment of capital spending programmes, and sagely notes that the “outcome of these events remain uncertain”.
read more »
6 January 2012
PwC receives largest fine ever imposed on a UK accountancy firm
Accountant’s “very serious” misconduct in failing, for seven years, to discover that JP Morgan was not separating client and own funds
PwC has been fined £1.4 million and “severely reprimanded for its misconduct” in relation to its reports to the Financial Services Authority on the compliance by JP Morgan Securities Limited (JPMSL) with the FSA rules relating to client money. The Accountancy & Actuarial Discipline Board (AADB) Tribunal’s Decision is here and the AADB press release is here.
PwC was the auditor of JPMSL in the years 2002 to 2008. As part of that role, PwC reported to the FSA in respect of the compliance by JPMSL with the rules relating to the segregation of client money by JPMSL (the CASS rules). JPMSL conducted futures and options business and as a result handled large amounts of client money. The amount of client money held by JPMSL during the relevant years at any time ranged up to US$23 billion.
JPMSL and its parent bank JP Morgan Chase effected daily sweeps of the balances of segregated client assets into consolidated overnight accounts at JP Morgan Chase. The result was that client assets of JPMSL ceased temporarily to be segregated, and the reports of PwC to the FSA concerning the segregation of JPMSL’s client assets were in fact false.
read more »
19 December 2011
Private Equity Guidelines Monitoring Group: Fourth Report
Disclosure and communication by private equity firms and their portfolio companies
The Guidelines Monitoring Group (the GMG) has produced its fourth report (the Report), summarising the private equity industry’s conformity with the Guidelines for Disclosure and Transparency in Private Equity (the Guidelines). The Guidelines were introduced following Sir David Walker’s review in November 2007 of the adequacy of disclosure and transparency in private equity.
read more »
19 December 2011
Creating a category of “micro entity” for accounting purposes: Revision to EU law agreed and so UK proposals can be advanced
Changes to the Fourth Company Law Directive pave way for UK Government to develop a new reporting regime for the smallest companies
UPDATE 24 March 2012: Following the EU’s adoption of the Directive on micro-entity reporting in February 2012, the Government has now announced that it intends to take advantage of the new EU regime and will consult on implementation in due course. See this post for details.
The European Parliament on 13 December 2011 agreed its position on a draft directive on the accounting and financial reporting requirements of very small companies – what are now referred to as “micro entities”. The effect is to create a new reporting regime better suited to micro entities than that set out in the 1978 Fourth Company Law Directive and the 1983 Seventh Company Law Directive (and in turn reflected in the UK Companies Acts), which is considered too demanding for the very smallest companies.
A set of FAQs on the draft directive is here and a press release is here.
The draft directive is expected to come into force in early 2012. The result will be that the UK Government will be able to proceed – should it decide to – with its proposal to develop a reporting regime for the smallest companies. That proposal was set out in a joint Department of Business, Innovation and Skills and Financial Reporting Council discussion paper titled “Simpler Reporting for the Smallest Businesses” in August 2011, which we discussed in this post.
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1 December 2011
European Commission proposals for reform of the audit market: Big Four firms may have to separate their audit businesses
Wide-ranging changes suggested to the structure of the statutory audit market and the business model of the Big Four
The European Commission published its proposals for reform of the audit market on 30 November 2011. These proposals, if enacted in their current form, would entail major changes to the business models of the Big Four auditors, to the work of the audit committees of large listed and regulated companies, and to the regulation of the audit market in the EU. To implement its proposals, the Commission has put forward a draft Directive to amend Directive 2006/43/EC (the Statutory Audit Directive) and a new Regulation on specific requirements for the statutory audit of public-interest entities. The Commission’s press release is here and its useful FAQs are here.
The impetus behind the proposals is the perceived failure of auditors to identify problems in their audits of those financial institutions that had to be rescued by government bail-out in the early stages of the financial crisis. In the words of the Commission’s proposed Regulation:
“Given that many banks revealed huge losses from 2007 to 2009 on the positions they had held both on and off balance sheet, it is difficult for many citizens and investors to understand how auditors could give clean audit reports to their clients (in particular banks) for those periods.”
The Commission’s proposals
read more »
29 November 2011
Healthcare Locums fiasco: BDO under investigation
Auditors to be investigated following AIM-listed company’s internal review of accounting irregularities
In September 2011 we reported on the “serious accounting irregularities” that led to Healthcare Locums plc’s shares being suspended from AIM for eight months. Yesterday the Accountancy and Actuarial Discipline Board (AADB) launched an investigation into BDO’s role in the:
“• preparation, approval and audit of the financial statements of Healthcare Locums plc and its subsidiaries for the years ended 31st December 2008 and 2009;
• preparation and approval of the interim financial statements of Healthcare Locums plc and subsidiaries for the six months ended 30th June 2010;
• operation by Healthcare Locums plc and its subsidiaries of the discounting facility with Barclays Bank plc during 2010; and
• compliance by Healthcare Locums plc and subsidiaries with the National Health Service terms and conditions as set out in the Framework Agreements since 1 January 2008.”
The AADB is the investigative and disciplinary body for accountants and actuaries in the UK and it focuses on cases which raise important issues affecting the public interest.
See also: BDO becomes the first sponsor to be publicly censured by the Financial Services Authority.
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7 November 2011
European Commission proposes replacing the Accounting Directives with a single, SME-friendly, directive
Aims to reduce the administrative burden on smaller companies and increase the clarity and comparability of all financial statements
The European Commission published on 25 October 2011 the draft text of a proposed directive (the Proposed Directive) to:
- Introduce a specific regime for small companies that will “considerably reduce” work that needs to be done by small companies when they prepare their accounts; and
- Improve the comparability and clarity of financial statements prepared by medium-sized and large companies.
The Proposed Directive would also repeal and replace the Fourth and Seventh Company Law Directives of 1978 and 1983 respectively, usually referred to as the “Accounting Directives”.
read more »
3 November 2011
Sharman Inquiry on going concern reporting and liquidity risks: Preliminary report
Key lessons for directors and auditors on reporting short term liquidity risks and longer term solvency risks
The Sharman Panel of Inquiry on “Going Concern and Liquidity Risk: Lessons for companies and auditors” today issued its preliminary report and recommendations. As we reported in this post of March 2011 and this post of May 2011, the Inquiry was set up by the Financial Reporting Council (the FRC) to consider:
read more »
21 October 2011
OFT refers large-firm audit market to the Competition Commission
Competition Competition opens public inquiry and will conduct comprehensive investigation of the Big Four auditors
21 October 2011
Consultation on proposed reforms to the structure of the Financial Reporting Council
Aim is to refocus and streamline the corporate governance and reporting regulator
17 October 2011
The FRC’s Financial Reporting Lab: A pragmatic approach to improving company reporting
The accounting watchdog’s new forum for companies and investors to “come together to develop solutions to today’s reporting needs”
14 October 2011
Cutting clutter: City lawyers critique FRC discussion paper
Annual report content requirements are in the hands of legislators and regulators, not companies
6 October 2011
Widening small company and subsidiary exemptions from audit: Government proposals
More small companies and subsidiaries would be taken out of the mandatory audit requirement; and switching from IFRS to GAAP would be made easier
30 September 2011
What makes a good set of report and accounts?
Financial Reporting Review Panel guidance on optimal corporate reporting
28 September 2011
Auditors: European Commission to advocate joints audits, mandatory rotation, spin-off of consultancy businesses
Commission’s reported plans reflect unease at the role played – or not played – by auditors in the financial crisis
19 September 2011
Narrative reporting: Government proposals for reform
A new, simpler framework for narrative reporting and clearer information on executive pay?
19 September 2011
IIRC publishes “integrated reporting” discussion paper
International Integrated Reporting Committee calls for a more meaningful approach to corporate reporting
19 September 2011
Non-audit services: Changes to how large companies disclose fees paid to their auditor
The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) (Amendment) Regulations 2011 will come into force on 1 October 2011.
13 September 2011
How to make your accounts look better and then have to restate them
Healthcare Locums relisted after investigation into suspected accounting irregularities; shares down 90%
8 September 2011
FRC announces proposed reforms to company reporting and audit
Corporate governance and reporting watchdog takes next steps to improve the quality of reporting and audit
7 September 2011
ecoDa publishes guidance for listed company audit committees
Describes the processes and practices that create effective audit committees
6 September 2011
Simpler financial reporting for the smallest businesses?
Joint BIS and FRC discussion paper to prompt debate on how the smallest companies should report their finances
UPDATE 24 March 2012: Following the EU’s adoption of the Directive on micro-entity reporting in February 2012, the Government has now announced that it intends to take advantage of the new EU regime and will consult on implementation in due course. See this post for details.
31 August 2011
EBITDA
Earnings before interest, tax, depreciation and amortisation – or:
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11 August 2011
FRC wants Interim Management Statement requirement scrapped
Corporate governance regulator argues that quarterly reporting just drives short-termism
2 August 2011
Companies House drops requirement for mandatory electronic filing of accounts by 2013
Change of policy driven by Government determination not to add to regulatory burden on small businesses
1 August 2011
OFT one step away from referring Big Four auditors to the Competition Commission
Final decision on the large-firm audit market will follow a six week consultation period
28 July 2011
Big Four accountants are just too credulous, says audit watchdog
Audit Inspection Unit reiterates call for auditors to be more sceptical in their work
27 July 2011
Narrative reporting: Restructuring the contents of the annual report
Minister gives outline of Government thinking on the future of narrative reporting
UPDATE 19 September 2011: The Government has now published its proposals on narrative reporting, as we discuss in this post.
21 July 2011
Financial reporting: Regulator issues reminder of the fundamental importance of “true and fair”
FRC paper follows concern about the relationship between “true and fair” and International Financial Reporting Standards
20 July 2011
Inspectors’ report into the quality of large company audits
Financial Reporting Council body issues its annual review of the quality of the statutory audits of large companies
