The ICAEW is launching its new Financial Reporting Faculty at a time when the need for businesses to present financial information that reflects economic reality has never been greater.
Dr Nigel Sleigh-Johnson, Head of the ICAEW's Financial Reporting Faculty, said:
"In today's very competitive conditions, clear, focused and thoughtful financial reporting can give companies an edge.
"Markets demand high quality financial reporting and the Financial Reporting Faculty has been launched by the ICAEW to provide practical support to both preparers and users of financial statements."
The faculty also publishes today its briefing paper Issues at the Forefront of Financial Reporting highlighting the importance of:
Disclosure and transparency
Efforts on the part of quoted companies to provide forward looking information and disclosures regarding principal risks and how they are managed - without unnecessarily raising concerns amongst lenders, suppliers and customers - will need to be redoubled.
Going concern and liquidity
Users of the accounts will be looking for a clear understanding as to why the going concern basis is appropriate and what assumptions were made in arriving at this conclusion.
Impairments and valuations
An increased incidence of write downs is inevitable given the changes in the economic outlook, and revised projections will trigger impairment reviews.
Companies therefore have the unenviable task of predicting future cash flows and selecting appropriate discounts rates and will be expected to explain their conclusions and the main assumptions on which they are based. Valuations of other balance sheet items will also be under the spotlight.
Pensions
The trouble with pension accounting, and the disclosure that goes with it, is that in many cases it doesn't tell the full story, particularly the implications of a deficit on the company's cash flows.
Explanations as to how the accounting numbers relate to the funding requirements, particularly increased contributions in the short term which could increase the pressure on liquidity, would be valuable to users.
Distributions
Companies which are short of cash may have to defer paying dividends for that reason.
However, perhaps less obviously, UK companies may have enough cash to pay a dividend but find that their distributable reserves have been wiped out by losses, in particular by impairment write downs which do not directly impact on cash resources.
At the formal launch event to be held today, 27th January, delegates will hear presentations from a number of members of its high level Advisory Group on the topic Financial Reporting in 2009/2010: The Challenges Ahead.
Tom Jones - Vice-Chairman of the International Accounting Standards Board (IASB), and Faculty Advisory Group member
Sylvie Voghel - Chair of International Federation of Accountants (IFAC) Small and Medium Practices Committee, and Faculty Advisory Group member
Professor Ray Ball - Sidney Davidson Professor of Accounting at the Chicago Booth School of Business, and Faculty Advisory Group member
Ian Mackintosh - Chairman of the UK Accounting Standards Board (ASB), and Faculty Advisory Group member.
To find out more about the work of the Financial Reporting Faculty visit www.icaew.com/frf or contact Katerina Nicholas at katerina.nicholas@icaew.com or phone the Faculty on +44 (0) 20 7920 8487.
Media enquiries:
Contact Heather Coath, ICAEW press office, on 07715 496493 or email heather.coath@icaew.com