For immediate release: Wednesday 9 November 2005

IMA CONCERNED OVER FUTURE DIRECTION OF FINANCIAL REPORTING

IMA has today written to the International Accounting Standards Board and the Financial Accounting Standards Board to raise concerns about the future direction of financial reporting.

The Association is particularly concerned with the proposals to move from a “parent concept” where accounts focus on the needs of the shareholders to the “entity concept” which provides information to a wide and diverse range of users.

The IMA letter emphasises that moving to an “entity concept” (which, for example, does not identify outside interests in income and includes all the goodwill in respect of a part owned subsidiary) will add complexity and opacity to group accounts.  It could undermine the whole framework of financial reporting which in turn, could increase the cost of capital.  Accounts should continue to be prepared from the point of view of the parent company’s owners so they can see what assets they own and the risks to their investment. 

Richard Saunders, Chief Executive of the IMA, commented:

“While accounts are expected to fulfil a growing set of needs and have an increasingly wide range of users, this change would leave shareholders – the ultimate providers of risk capital – not properly informed about what they own.  A company’s accounts should be prepared to reflect the perspective of its owners and should continue to be prepared under the “parent concept”. If necessary specific reporting should be developed to address the needs of other users.”

IMA’s response is attached.

-Ends-

For further information, please contact:
Helen Stephenson, Communications Officer, IMA, 020 7831 0898

Out of hours contact:
Mona Patel, Head of Communications, IMA, 07834 089332

Notes to Editors:
The International Accounting Standards Board (IASB) is an independent, privately-funded accounting standard-setter based in London, UK. Its members come from nine countries and have a variety of functional backgrounds. The IASB develops global accounting standards and co-operates with national accounting standard-setters to achieve convergence in standards world-wide.

The Financial Accounting Standards Board (FASB) is the designated US organisation for establishing accounting standards.  It is officially recognised as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants.

The IASB and FASB are undertaking the joint Conceptual Framework Project with the aim of developing a common framework as a foundation for future accounting standards.   Although we understand that the decisions reached to date are tentative, the initial joint IASB and FASB meeting decided that financial reports should be prepared from the entity’s perspective and present information to a wide range of users, rather than focus on the needs of the existing common shareholders.