§ 36. Mr. Doverasked the Secretary of State for Trade what progress is being made in the implementation of current cost accounting; and whether he will make a statement.
§ Mr. EyreA statement of Standard Accounting Practice on Current Cost Accounting (SSAP 16) was issued by the Accounting Standards Committee in March 1980, relating to accounting periods starting on or after 1 January 1980. The standard applies to the financial statements of listed and other large companies; smaller companies have also been encouraged to adopt CCA accounting methods on a voluntary basis.
The development of the standard by the accountancy professions was undertaken with the full support of this and earlier Administrations, in the belief that accounts compiled on the historical cost basis cannot give all the information the compilers and users of company accounts would find desirable in reaching decisions. As my right hon. Friend the previous Secretary of State told the House on 31 March 1980, the Government welcome the standard and the progress it represents towards more realistic financial reporting.
Progress in implementation must be primarily a matter for companies and their auditors. Accounts drawn up in accordance with the standard are only just beginning to become available, so it is too early accurately to assess progress in its implementation. My Department will be following developments with close interest. I am informed that the Accounting Standards Committee has made arrangements to monitor compliance with the standard and to identify any practical problems. The committee has also commenced work on the development of a system of reporting for value-based companies, such as investment trusts, property companies and insurance companies, which are at present outside the scope of the standard. The treatment of comparative figures and 5–10 year summaries is, I understand, also under review.
Where appropriate, public sector organisations are being invited to prepare their annual reports in accordance with the standard.
The position will be reviewed in the light of experience, although the standard has been introduced with the understanding that there will be no substantial change until 1983. I hope that all concerned will make the fullest use of this familiarisation period both to resolve any outstanding technical problems and to develop a habit of making practical use of current cost information in their decisions and in the assessment of company performance.
Current cost accounting is permissible in the statutory accounts drawn up and filed under the Companies Acts. This will be continued under the Companies Bill which was introduced earlier this month.