Companies (disclosure of auditor remuneration and liability limitation agreements) regulations 2007
Comments from ACCA
January 2008
ACCA is pleased to comment on the above draft regulations. Our principal reaction to these regulations is to regret that, even before the new Companies Act accounts disclosure regulations have been finalised, a separate set of rules relating to accounts disclosures is to be published. These additional rules appear to mean that the praiseworthy goal of bringing all company disclosure requirements within one, integrated set of rules has already been undermined. If it is still possible to incorporate these new disclosures within the 'main' disclosure rules we would urge that this be done.
As regards the content of the rules in question, the disclosures relating to auditor remuneration appear to be, for the most part, a reiteration of the existing rules, the only substantive change being a new option for large companies to avoid disclosure of fees relating to 'other services' payable to 'distant associates' of the auditor.
The only technical change we would suggest making on the disclosure of audit fees is to paragraph 3 of Schedule 1. The provisions in that paragraph appear to assume that a corporate body will only be a company. Clearly, very many audit firms which audit the accounts of public companies will be LLPs, so paragraph 3 needs to make provision for members of LLPs as well as directors of companies.
As regards the disclosure of liability limitation agreements, companies will be required to disclose the 'principal terms' of any agreement and the date of the shareholder agreement. Given that there is no attempt to define 'principal terms', either here or in the Act itself, we assume that the document currently being drafted by the Financial Reporting Council will assume authoritative status. The requirement to disclose principal terms (and not the full agreement) tends to support our view that the principal terms should be kept reasonably concise, unlike the 'long form' terms which have been put forward for comment by the FRC.
The draft regulations also suggest that the information need not be disclosed if the agreement was entered into so late in the day as to make it impractical to be disclosed. We do not see that such an exemption clause is likely to be necessary. Even if the agreement is entered into after the balance sheet date - which seems to us to be highly unlikely anyway - it should still be feasible to make reference to it in the company's accounts.