The Corporate Report (UK)

31/08/2021 0 By indiafreenotes

The Accounting Standards Steering Committee of the Institute of Chartered Accountants in England and Wales Published ‘The Corporate Report’ in 1976 as a discussion paper covering the scope and aims of published financial reports, public accountability of economic entities, working concepts as a basis for financial reporting, and most suitable means of measuring and reporting the economic position, performance and prospects of undertakings.

The Corporate Report’s main findings are as follows:

  1. The basic philosophy and starting point of The Corporate Report is that financial statements should be appropriate to their expected use by potential users. In others words, they should attempt to satisfy the information needs of their users.
  2. The report assigned responsibility for reporting to the ‘economic entity’ having an impact on society through its activities. The economic entities are itemized as limited companies, listed and unlisted; pension schemes, charitable and other trusts, and not-for-profit organisation; non-commercially oriented Central Government departments and agencies, partnerships and other forms of un-incorporate business enterprises; trade unions and trade and professional association; local authorities, and nationalized industries and other commercially oriented public sector bodies.
  3. The report defined users as those having a reasonable right to information and whose information needs should be recognised by corporate reports. The users are identified as the equity investor group, the loan creditor group, the employee group, the analyst-adviser group, the business contact group, the government, and the public.
  4. To satisfy the fundamental objectives of annual reports set by the basic philosophy, seven desirable characteristics are cited, namely, that the corporate report be relevant, understandable, reliable, complete, objective, timely, and comparable.
  5. After documenting the limitations of current reporting practices, the report suggests the need for the following additional statements:
  • An employment report, showing the-size and composition of the work force relying on the enterprise for its livelihood, the work contribution of employees, and the benefits earned.
  • A statement of value added, showing how the benefits of the efforts of an enterprise are shared among employees, providers of capital, the state and reinvestment.
  • A statement of money exchange with government, showing the financial relationship between the enterprise and the state.
  • A statement of future prospects, showing likely future profit, employment, and investment levels.
  • A statement of corporate objectives showing management policy and medium-term strategic targets.
  • A statement of transactions in foreign currency, showing the direct cash dealing, between the United Kingdom and other countries.

Finally, after assessing six measurement bases (historical cost, purchasing power, replacement cost, net realisation value, value to the firm, and net present value) against three criteria (theoretical acceptability, utility, and practicality) the report rejected the use of historical cost in favour of current values accompanied by ;he use of general index adjustment.