Building Societies Act 1986 (International Accounting Standards and Other Accounting Amendments) Order 2004

Part of the debate – in the House of Lords at 12:05 pm on 16th December 2004.

Alert me about debates like this

Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 12:05 pm, 16th December 2004

My Lords, I am grateful to noble Lords who have contributed to this short debate, although I am more grateful to those who have been exceedingly brief than those who have been brief but pertinent with their questions. I shall do my best to answer the issues which the noble Baroness addressed, particularly in comparing the provisions for building societies with the state of play with regard to companies.

The noble Baroness asked about progress with regard to the issuing of guidance. The Financial Accounting Standards Board has issued guidance on International Accounting Standard 39. It did so on 15 December and the guidance is on the FASB website. She asked whether progress had been made on that and I can be reasonably definitive in my reply.

I understand what the noble Baroness says about the business review. She will recognise that further consultations were developed with regard to those other companies. It is not a question of the Government's right hand not knowing what the left hand is doing; it is a reflection of the fact that the position for companies is a little different from that of building societies.

The noble Baroness asked in particular about aspects of the fair value directive. We implemented it last week in the separate statutory instrument to which I referred in my response to the intervention by the noble Lord. We have just adopted with building societies the broad, flexible approach that we have adopted with companies. Building societies will be able to use fair value accounting, if they wish to do so. In the consultation on the issues, we received strong support for our approach to the fair value directive. In that area, I can give assurances that progress is being made and that it is broadly acceptable to the interests outside.

With regard to exemptions for small companies, I must point out that there is no formal method of distinguishing between small and large building societies in the same way as one can distinguish between companies. They prepare accounts on the same basis, while companies vary. The review must be only as extensive as is appropriate to the size of the society. It is not a case of one-size-fits-all. We cannot specify different requirements because we cannot separate building societies in the same way as we can with companies. That is why the issue of exemptions does not really apply.

We intend to publish our revised OFR regulations in the near future. We are making rapid progress on effective communication as a result of this order, which is itself the product of considerable consultation. As the noble Lord, Lord Newby, was generous enough to indicate, it is a step towards the implementation of a single market that is broadly accepted throughout British society and British business as being of great benefit.

I realise that this issue will be of limited interest to the wider public, but it is important for the wider financial services sector to be able to operate on the same level playing field as companies. That is the point that I have sought to stress as the basis of the order. The order provides for societies to employ high-quality modern accounting practices. That will result in greater transparency in accounts and will enable greater access to global markets and global investments. Building societies have an important role to play in the financial services market, and the order recognises that role by increasing opportunities for them and ensuring that, against the background of the developing European perspective, they are four-square with the developments that we have already set in train for companies.

If there are points of detail that I have not covered sufficiently for the noble Baroness, Lady Noakes, who asked some pertinent and precise questions, I will, of course, write to her.