HL Deb 11 November 1976 vol 377 cc817-9

[Nos.22 to 26]

Clause 12, page 14, line 40, leave out from ("cause") to end of line 42 and insert ("accounting records to be kept in accordance with the provisions of this section. (1A) The accounting records shall be sufficient to show and explain the company's transactions. (1B) The accounting records shall be such as to—

  1. (a) disclose with reasonable accuracy, at any time, the financial position of the company at that time; and
  2. (b) enable the directors to ensure that any balance sheet or profit and loss account prepared by them under section 1 above complies with the requirements of section 149 of the Act of 1948 (balance sheet to give a true and fair view of the company's state of affairs and profit and loss account to give a true and fair view of the company's profit or loss, etc.)").

Page 15, line 8, leave out from first ("of") to second ("of") in line 9 and insert ("stock held by the company at the end of each financial year of the company;

  1. (b) all statements of stocktakings from which any such statement as is mentioned in paragraph (a)above has been or is to be prepared; and
  2. (c) except in the case of goods sold by way of ordinary retail trade, statements").

Page 15, line 12, leave out from ("identified") to end of line 14.

Page 15, line 29, leave out from ("enable") to end of line 33 and insert ("the directors to ensure that any balance sheet or profit and loss account prepared by them under section 1 above complies with the requirements of the said section 149 of the Act of 1948.").

Page 15, line 38, after ("it") insert—

  1. ("(a) in the case of a private company, for three years from the date on which they are made; and
  2. (b) in any other case").

Lord WINTERBOTTOM

My Lords, I beg to move that this House doth agree with the Commons in their Amendments Nos. 22 to 26. These are rather weightier Amendments than some of those we discussed earlier. Amendment No. 22 recasts the general requirements as to accounting records in response to points raised by the House on an earlier occasion and in consultations with the accountancy profession and others about the Bill. The new subsections (1A) and (1B) expand and amend the general requirements in subsection (1) in two main respects. First, they make it an express requirement that accounting records should always be kept up to date by requiring that they shall be such as to, disclose with reasonable accuracy, at any time, the financial position of the company at that time". It was already implicit in the clause that the accounting records should be kept up to date but, in view of the importance of this point, the Government accept that an explicit requirement is desirable.

Secondly, the Amendments impose a new requirement that the accounting records should be such as to enable the directors to prepare accounts which comply with the requirements of the Companies Acts and which, in particular, give a true and fair view of the state of the company's affairs. This requirement, together with the provision that the accounting records shall disclose the financial position of the company at any time, replace the provision in the clause as originally drafted that the records shall be sufficient to give a true and fair view of the state of the company's affairs. It was represented to us that, in practice, it was not possible for a true and fair view of the state of the company's affairs to be obtained from the raw data in the accounting records. Such a view could be obtained only from the accounts drawn up on the basis of those records which pulled all the relevant material together. The Government accept the force of this argument and the Amendments redraft the clause accordingly. Is it your Lordships' wish that I go a little further, or shall we discuss the basic point immediately?

Amendment No. 25 is consequential. It brings the wording of subsection 6(b) into line with that of subsection (1) as amended by Amendment No. 22. Amendments Nos. 23 and 24 redraft subsection (3) so as to meet the criticism that the requirement for companies dealing in goods to keep statements of all stocktakings was unduly onerous. They substitute for the requirement that companies dealing in goods should keep all statements of stocktaking the requirement that they should keep the statements of stocktaking on the basis of which the year-end statement of stock is prepared. Amendment No. 26 reduces from six years to three the period for which private companies must preserve accounting records. The six years' requirement will apply to public companies only. On further consideration, it was decided that three years was adequate for private companies. This is also the period for which records have to be kept for VAT purposes. These are technical and complex Amendments. I know that the noble Lord, Lord Lye11, being a professional accountant, will understand them better than I do, but I believe that they are sound. I beg to move.

Moved, That the House doth agree with the Commons in the said Amendments.—(Lord Winterbottom.)

10.40 p.m.

Lord LYELL

My Lords, if I may address myself first of all to Amendment No. 22, we are very grateful for the very detailed way in which the noble Lord, Lord Winterbottom, spelled out the provisions of this Amendment. We are particularly glad about the method of laying out paragraph (1B) as paragraph (1A). At an earlier stage of the Bill— I think the Committee stage—I stressed the necessity, in the opinion of the accounting profession, that accountancy records should be sufficient to disclose at any time the liquid position of that company.

We are very pleased that the Government and the Department have seen this matter in the most urgent light and we are also very pleased that this paragraph has been inserted at this point. Also we are grateful for the noble Lord's explanation of the methods of stocktaking because, as the noble Lord will be aware, in Amendment No. 23 the methods of stocktaking can vary. Indeed, different methods of stocktaking can affect materially the profit record and the profits of the company and in some cases can have a wholly disproportionate and distorting effect. So far as the other three Amendments are concerned, we are grateful that the noble Lord has presented them and we accept that they clarify a great deal the accounting records.