UK: the future of financial reporting in the UK and Ireland

The Accounting Standards Board, part of the Financial Reporting Council, has today published far reaching proposals for a three-tier financial reporting framework, the aim of which, it states, is to "balance the needs of preparers and users of accounts". The framework will be based on three sets of standards: IFRS (tier 1), FRSME (tier 2) and FRSSE (tier 3).  Here is an overview of the new framework (taken from the ASB's press release, available here).

Quoted groups will continue to report under international financial reporting standards (IFRS), as adopted by the EU. They would be joined in Tier 1 by other companies that are publicly accountable. This would apply if their debt [or equity] is traded on public markets, or if they hold deposits or manage other people’s money. (Some very small financial institutions would be exempt.) The smallest companies will continue to use the simplified version of UK standards, known as the FRSSE. Those in between would report under a new standard based on the IFRS for SMEs, which is considerably shorter and less complicated than current UK standards. The FRSME, as it would be called, would be modified to comply with UK and EU law and to ease tax reporting. It runs to about 400 pages".

For further information see the Financial Reporting Exposure Draft available here (part 1: explanation, pdf), here (part 2: draft standards, pdf) and here (appendices, pdf) and a key facts document available here (pdf).

UK: FTSE100 directors' pay - IDS report

Income Data Services has recently published its Directors' Pay Report for the year to June 2010. In the accompanying press release it is reported:

FTSE-100 directors saw their total earnings [basic salary, annual bonus payments, benefits in kind, notional/actual value of exercised share option gains, total cash value of long-term incentive plans and miscellaneous payments, including special payments for pensions, housing assistance, one-off bonuses for particular projects and profit share] boosted by an average of 55% while across the FTSE 350 as a whole total board pay went up by an average 45% ... On the back of these increases FTSE 100 chief executives took home £4.9 million on average in total earnings during the year. The report shows there has been a dramatic reversal in fortunes in the last 12 months. While basic salary increases across the board were subdued, growing at just 3.6% for FTSE-100 chief executives, pay packages were boosted by a resurgence in bonus payments, the value of share option gains and separate long-term incentive plans (LTIPs)"

UK: registration of company charges - responses to BIS consultation published

Earlier this year the Department for Business, Innovation and Skills published a consultation paper seeking views on proposals for the reform of the legal framework governing the registration of charges by companies and limited liability partnerships: see here (pdf). A summary of the responses received was published yesterday: see here (pdf).

Europe: strengthening the single market

Earlier this week the European Commission published a Communication titled Towards a Single Market Act – for a highly competitive social market economy: see here (pdf). The Communication sets out 50 proposals the purpose of which is to strengthen the single market. Of particular interest are the following:

Proposal 14: The Commission will propose a review of the accounting Directives in 2011 to simplify financial reporting obligations and to reduce the administrative burden, especially for SMEs.

Proposal 16: The Commission will explore measures with the potential to encourage private investment – particularly in the long term – to make a more active contribution towards achieving the objectives of the Europe 2020 strategy. These measures might concern the reform of corporate governance and create incentives for the long-term, sustainable and responsible investment required by smart, green and inclusive growth.

Proposal 19: The Commission will take steps to improve the coordination of national tax policies, notably by proposing a Directive introducing a common consolidated corporate tax base (CCCTB) in 2011.

Proposal 21: In 2011 the Commission will propose legislation to introduce the linking of company registers.

Proposal 38: The Commission will launch a public consultation (Green Paper) on corporate governance. It will also launch public consultation on possible ways to improve the transparency of information provided by businesses on social and environmental matters and respect for human rights. These consultations could lead to legislative initiatives.

UK: insider dealing penalty increased by Tribunal

Earlier this year the Upper Tribunal (Tax and Chancery Chamber) upheld a decision of the Financial Services Authority that an individual, Mr Scerri, had committed market abuse: see here (pdf). A separate hearing later took place to determine the penalty and, in particular, whether Mr Scerri should face a penalty of £ 20,000 in addition to disgorgement of his profits. The FSA had originally decided not to impose an additional penalty on the grounds that it would cause serious financial hardship but it was subsequently discovered that the Mr Scerri had provided the FSA with incomplete and misleading information and that he had, following notification of the proposed fine, lost significant funds through trading.

In the second hearing, the Tribunal found - see here (pdf) - that Mr Scerri's financial position was self-induced after he became aware of the proposed penalty and that the seriousness of his actions warranted the imposition of the £ 20,000 penalty. In the words of the Tribunal: "...the penalty of an amount that merely covers the insider information profit is inappropriate; it does not penalise the abuse of breach" (para. 18). The Financial Services Authority has, unsurprisingly, welcomed the Tribunal's decision: see here.