Called to account

CORPORATE Britain has been thrown into turmoil with the introduction of new rules on the way pension liabilities are reported. Now a fresh swathe of international accounting regulations will become standard from next year.

The idea is to make it easier for shareholders to compare companies' performance by making sure important information is is placed firmly on the balance sheet, not buried in the accounts. But the changes mean some corporations could see their profits take a spectacular dive.

Companies using complex financial instruments such as derivatives to hedge against risk and those that issue large numbers of share options could see dramatic swings in profits and losses. In the past, many companies have given their executives share options, but shareholders were kept in the dark about the cost.

Change has been a long time coming. Highprofile collapses, including Enron, WorldCom and Parmalat, have shattered investors' faith in traditional accounts.

Despite the inevitable teething problems, Jon Symonds, who has blazed a trail for improved reporting standards, believes shareholders will benefit and the new rules will help to rebuild faith in accounting standards.

ASTRAZENECA is more accustomed to media coverage of its cholesterol- busting drugs than its accounting methods. But last week it was the turn of its chief financial officer, Jon Symonds to hog the limelight.

Symonds, who is also chairman of the influential 100 Group of Finance Directors, is taking centre stage because of the company's trailblazing attempts to inform investors and analysts about the effects of the new set of accounting rules due to take effect on January 1 for companies listed on European markets.

The arrival of International Accounting Standards (IAS) has been a protracted birth, with major disputes between the International Accounting Standards Board (IASB), several large European banks and the European Commission. But finally, the vision of Sir David Tweedie, chairman of the IASB, is close to being realised.

Symonds says: 'This is something that many of us have been striving for - a single, globally recognised set of accounting standards.

'This will mean that, for the first time, investors anywhere in the world can pick up a set of accounts, look at a profit figure and know that it means the same thing.'

He has charted the progress of IAS since the beginning, having spent his career in finance. He joined Thomson McLintock, now part of accountancy giant KPMG, from university and spent 17 years there, latterly specialising in chemicals and pharmaceuticals. He was recruited to Zeneca as chief financial officer in 1997.

Symonds, married with two children, has also been devoted to the cause of improving corporate reporting and rebuilding investor confidence as a board member of the UK Accounting Standards Board. He is also a non-executive director of high-tech security company QinetiQ and drinks giant Diageo.

Now, as head of the 100 Group, he has become a strong supporter of IAS.

Until now, major companies have used several accounting standards because there has never been a common denominator accepted by all regulators.

The introduction of IAS across Europe will end the need for companies operating in different parts of the Continent to have several sets of accounts to show the same numbers. The next step will be to get the standards recognised in America.

But while the debate has gone on at the highest levels in Brussels, AstraZeneca's announcement last week was the first time that a British company had set out in detail what the changes will mean in terms of presentation of the accounts and the effect on the numbers themselves.

The effect was minimal on AstraZeneca's accounts, resulting in a reduction of 2.5% in its operating profits.

However, Symonds says that investors should be aware of three main areas where the changes are likely to be most noticeable in company accounts - pensions, share options and financial instruments.

The recognition of pension deficits in accounts has already been a hot topic for British companies since the UK Accounting Standards Board recommended the introduction of FRS 17, requiring companies to show pension liabilities.

This is not yet mandatory, but while many domestic firms will already have swallowed this bitter pill, many more across Europe have never had to do this before - and results could come as a major shock.

While the change will bring more information and, therefore, complexity into the accounts, AstraZeneca's director of external financial reporting, Bill Hicks, assures investors that the traditional methods of valuing a company's performance - profits and sales - will remain the same.

'There may be more explanation needed from companies but the headline figures will still be important,' he says.

'It is important to stress that these are accounting changes. It does not change cash generation.'