COMMONS AMENDMENTS (Hansard, 7 November 1989)

§ Lord Trefgarne
My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 25 and 26. I shall speak at the same time to Amendments Nos. 41, 42 and 322.
This is the second group of amendments relating to the Dearing Report to which we have already referred. In line with the Dearing proposals the amendments require that the directors of public companies and large private companies state in their accounts whether those accounts have been drawn up in accordance with applicable accounting standards, to identify any material departures and to explain the reasons for such departures.
My department's consultation since the publication of the Dearing Report a year ago has shown an overwhelming majority of the 40 responses in favour of the proposal that there should be such a requirement, at least in relation to all large companies. Thirty-three gave outright support and three qualified approval. Well over half the responses favour applying this to all public companies and all large companies and this is the approach followed in the amendments. The requirement is expressed to apply to all companies that are not eligible to deliver modified accounts.
Amendment No. 41 also provides the basis on which the Government will be able to make grants to a body such as the Financial Reporting Council. 607 While it is principally for Sir Ronald to secure the commitment, financial and otherwise, to put the new structures into place, we have made clear that part of the cost will be met by a levy on companies, via the fee charged for the filing of the annual return. This amendment enables a grant equivalent to the proceeds of a levy to be paid to a body such as the Financial Reporting Council. I hope that I have adequately explained the amendments. I beg to move.

§ Lord Mottistone
My Lords, I wish to speak to Amendment No. 322. Your Lordships will be aware that I have been advised on this amendment by the CBI. I welcome the Government's proposals which I believe are fully in accord with the views of the CBI. I am told that the CBI welcomes the Government's undertaking to consult with the relevant interested parties on the issue of the funding of the Financial Reporting Council. The CBI looks forward to future discussions. It is considered that those who prepare and use accounts, not least the Government as a major preparer and user, should bear the cost.

§ Lord Peston
My Lords, these are obviously sensible amendments, but I have one question for the Minister. I speak as one who is not an accountant. We have accounting standards. Essentially, the requirement is to produce disclosure with respect to compliance with accounting standards. However, as a layman, I fail to understand what kind of circumstance would cause someone not to comply. Why is the requirement not mandatory, and why is there not a simple statement that everyone should produce accounts that comply with accounting standards full stop? Is there some subtle reason for voluntarism which I do not understand?

§ Lord Trefgarne
My Lords, this matter was discussed at great length at an earlier stage of the Bill. I am not sure whether the noble Lord took part at that time; I am afraid that I did not. I believe the House would be unduly wearied if I were to repeat all the arguments that were then deployed. However, if the noble Lord wishes, I shall be happy to write to him.