KiteBlue

Druckman: New IFRS SME reporting standards are confusing

The International Federation of Accountants has published a financial reporting standard applying to SME organisations. But, argues M Institute co-founder Paul Druckman, the new standard will only give rise to confusion. KiteBlue asked Paul to explain his thoughts in a guest column.

In July 2009 the International Federation of Accountants (IFAC) published an International Financial Reporting Standard (IFRS) designed for use by small and medium-sized entities (SMEs). SMEs are estimated to represent more than 95 per cent of all companies. The standard is a result of a five-year development process with extensive consultation of SMEs worldwide.

This has created a dilemma for countries across the world in reflecting on IFRS implementation in deciding how big is an SME? Leading to a headline in Accountancy Age magazine: Confusion over SME size could complicate international rules.

Mumbai's 8/11 presents challenges of co-ordinated security

Mumbai's 8/11 is emblematic of a lack of security co-ordination across city, national and private sector organisations. Jyoti Banerjee examines the lessons that the West can learn from Mumbai's 8/11.

Mumbai’s terror attacks at the end of November have created a deep sense of sadness and loss among Indians everywhere. The pictures on TV screens showing casually-dressed young men casually spreading violence and death have been more upsetting than the anonymous bomb blasts that have characterised terrorist attacks in India till now. More than ever, it is possible to reflect on the continuing truth in Barack Obama’s words, spoken about the New York terrorists in 2001: "My powers of empathy, my ability to reach into another's heart, cannot penetrate the blank stares of those who would murder innocents with such abstract, serene satisfaction."

But there is also a growing resolve across the country that India should not be such a soft target for terrorist action. It certainly seems to lack any sort of co-ordinated structure or system that can deal with credible threats and prosecute them with any urgency. Security agencies around the world are already competing for bragging rights regarding who was first to inform the Indians that a sea-borne attack on Mumbai was imminent.

Do we need the RDAs?

The Taxpayers' Alliance would like the regional development agencies abolished. Jyoti Banerjee studies their report - he likes their data but disagrees with their recommendation.

This month a report from the TaxPayers’ Alliance claims that the £15 billion spent on the Regional Development Agencies since their creation in 1999 has been a total waste as the RDAs have contributed absolutely nothing to the economic performance of the regions in the UK.

The TPA report has three main planks of evidence:
1) The RDAs were created to improve the performance of the regions, particularly those outside London and the south-east. In 1992, London and the south-east contributed 36% of the UK economy, a figure that has grown (in the wrong direction) to 48% in 2006.
2) Employment across the country grew by 9.5% between 1995 and 2000, while it only grew by 3% between 2000 and 2005.
3) Regional inequality worsened: apart from London and the south-east, England’s regions grew faster before the RDAs were around, compared to the seven years after.

To add to this lack of performance is a long account of RDA waste. For example, 39 RDA bureaucrats earn over £100,000 a year, one part-time RDA chairman had a travel expense bill of over £50,000 in a single year, and one RDA managed to spend £20,000 sending some of their team to a film festival in Dubai.

UK drifts to 11th in competitiveness league table

The UK slipped nine places to the eleventh spot on the closely-watched table of global competitiveness put forward last week by the respected World Economic Forum (WEF). United States regained the top spot, despite the current turbulence in its economic performance, thanks to its ability to innovate and the efficiency of its markets. Jyoti Banerjee checks out the league tables in competitiveness.

Coming 11th out of 131 competing countries does not sound too bad – probably a better performance than the collective achievement of the highly-paid elite that make up England’s football team. What is disappointing is the basis for the fall from second to eleventh place. According to the Global Competitiveness Report for 2007-08, four of the most problematic factors in doing business in the UK are tax rates, tax regulations, an inadequately educated workforce and inefficient government bureaucracy.

Just take a moment and read that list again. In every instance, the finger of blame points to one culprit, the government.

Now that’s disappointing.

Banks have better things to do with their money...

... than to invest in the growth plans of medium organisations. Jyoti Banerjee asks if the investment preferences shown by banks are really the results of market imperfections that need to be dealt with by policy-makers.

A few months ago, I took part in a meeting at HM Treasury organised by M Institute where a few leaders of medium organisations were invited to present their stories: how their companies became medium-sized, and the challenges they had to overcome and still have to deal with. A recurring theme for these business leaders was the way in which problems relating to access to capital impair their growth performance.

Should government be doing something about it? Clearly, the Treasury officials we spoke to did not think so as there is no evidence in their eyes of market failure. Without evidence-based market failure, how can the government generate its favoured route of evidence-based policies? (One wag recently commented that it is not evidence-based policy-making at work here – simply, policy-based evidence-making).