Chartered Institute of Management Accountants

27 March 2006

CIMA (the Chartered Institute of Management Accountants) is calling for the reinstatement of the statutory Operating and Financial Review.  Commenting on the proposed amendments to the Company Law Reform Bill, CIMA has re-asserted its view that a statutory OFR is required to achieve the necessary improvements in narrative reporting.

When the Chancellor announced his intention to abolish the statutory OFR in November 2005, CIMA was among the first to express its surprise and disappointment.  It is now committed to working with Government, regulators, standard-setters and other stakeholders to clarify the revised requirements.  CIMA is also encouraging preparers to follow the best practice guidance on the OFR as set out in the ASB’s Reporting Statement 1.

Ian Christison, President, CIMA has continued to reiterate the merits of the statutory OFR:

“It enables shareholders to see information being used by the board to manage the business.  This is critical to helping them understand corporate performance and strategy and so improve resource allocation between companies.  Furthermore, the discipline of preparing an OFR undoubtedly encourages senior management to increase their focus on strategy and develop enhancements to those management information systems – commonly known as the performance dividend.”
 
“Following the Chancellor’s decision, CIMA believes that the UK’s leading position in improving business reporting has been adversely affected and this could be interpreted as a lessening of the UK’s commitment to corporate governance.  The international consequences of a repeal of the statutory nature of the OFR need to be carefully considered.  Therefore, CIMA is calling for the reinstatement of the statutory OFR for financial years beginning 1 April 2006.”

Charles Tilley, Chief Executive, CIMA has welcomed further opportunity to revisit the issue of directors’ liability for forward-looking statements:

“This has long been a concern for CIMA which prompted us to obtain and publish a legal opinion from Allen & Overy LLP in July 2005.”

“Whatever the outcome of the current consultation, CIMA urges the Government to include some provision in UK company law that directors should not be held liable when they have made forward-looking statements which are not reckless and which have been made in good faith.2  Companies are likely to be far more concerned about the issues surrounding director liability than the cost or regulatory burden of the statutory OFR – which can be far outweighed by the benefits of increased transparency.  The Government must now grasp this opportunity to resolve the issue.”

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For any media enquiries including interview opportunities, please contact:

Lottie Muir
Press & PR Manager, CIMA
+44 (0) 20 8849 2407
lottie.muir@cimaglobal.com

Notes to editors

1. CIMA (the Chartered Institute of Management Accountants) is the only international accountancy body with a sole focus on business.  It is a world leading professional institute that offers an internationally recognised qualification in management accountancy, focusing on accounting in business, in both the private and public sectors. It is the fastest growing UK based accountancy body, in terms of members, in both the UK and worldwide and is the voice of over 85,000 students and 65,000 members in 158 countries.  CIMA is responsible for the education and training of management accountants who work in industry, commerce and not-for-profit and has more members in the public sector than any other UK based body.  CIMA prides itself on the commercial relevance of its syllabus, which is in tune with the activities of high performance organisations, and evolves continually to reflect the latest developments in global business.  It is committed to upholding the highest ethical and professional standards of members and students, and to maintaining public confidence in management accountancy.  For more information about CIMA, please visit http://www.cimaglobal.com/
2. From a joint letter (14/03/2006) to the Secretary of State for Trade and Industry from the ABI and IoD with supporting organisations including the CBI, Hundred Group of Finance Directors and CIMA.
3. For more information about Allen & Overy’s legal opinion on directors’ liability, go to www.cimaglobal.com/ofrlegalopinion

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