The Hindu Business Line : Give the taxman a load of accounting matrix

MOVING closer to International Financial Reporting Standards, the UK's tax system could undergo a change from next year. This would necessitate changes to treatment of goodwill, loan arrangements and derivative treatments, reports AccountingWeb. "There will also need to be adjustments to treating R&D expenditure (and tax credits) as expenses rather than capitalising them and writing them off against the life of the asset." However, companies moving to IFRS fear of accelerated tax payments, because international GAAP "strives to reflect the fair value of assets rather than their historical cost".

A long-term project under way in the International Accounting Standards Board could solve the problems: "A financial reporting `matrix' to replace the traditional, single-figure P&L" with five components — business, financing, discontinuing activities, cash-flow hedges, and tax. If that sounds too futuristic, you can search for "IFRS" or its full form at the ICAI's site; it says, "Sorry! No matches were found. Please try using a different phrase."

Committee compulsion

CORPORATE governance should be driven by business, not regulators. This is the refrain of those who oppose the recent proposals of the EU on independent audit committees.

The new directive insists that all listed companies should have independent audit committees that in turn will recommend an auditor for shareholder approval and appointment. Also, it talks of audit rotation.

AccountingWeb cites a letter by the Confederation of British Industry, an employers' organisation in the UK, that the directive "would introduce an inflexible legal framework that overlooks the progress made under the current system of voluntary best practice."

Responsible score

KPMG has fared well in the latest Corporate Responsibility Index from the Business in the Community (BiTC). It has "the greenest fingers" as per a report in the Accountancy magazine. The index looks at how firms integrate corporate responsibility within core business practices and also management performance "across the key areas of environment, workplace, community and marketplace".

KPMG has come at the top, and was also rated as "the top professional services firm in terms of understanding and managing its environmental impacts." According to BiTC, "A key aspect is public disclosure." KPMG contributed to 1,100 charities in 2003, up from 750 in 2002.

That's something for the `anti-multinational firm' lobby to mull.

ISA site

FOR the Net savvy, a site to check is www.audit2005.com, a site launched by the ICAEW's Audit and Assurance Faculty and Accountancy's publisher CCH "to help practitioners understand International Standards on Auditing (ISAs) and their implementation in the UK." Apart from providing the latest technical information it would also look at practical implementation issues for ISAs.

Euro-accountant

WE TALK of common currency for the region, but they are talking of one qualification for Europe. The ICAEW is working with institutes in France, Germany, Ireland, Italy, Scotland and the Netherlands on the `Common content' project that aims for "unified accounting qualifications across Europe by 2005," reports Accountancy.

The ICAEW president is hopeful that by 2005 they will have unified "all the common elements" of training "except for the essentials of national law, custom and practice, which need to be different."

How would it help? It would "help restore confidence in financial reporting and help towards training a new generation of truly European professional accountants."

Also, it would improve the mutual recognition of accountancy qualifications within the EU. Will they be called EPAs?

GlobeTrot@thehindu.co.in