Asset managers call for financial reporting changes

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Sarasin and Partners, Legal and General Investment Management, Columbia Threadneedle Investments, and Hermes Investment Management are among investors seeking to shake up financial reporting so that companies must report unrealised profits.

The asset managers have contributed to a paper, which is being led by Natasha Landell-Mills of Sarasin and Partners, calling for improved standards in the International Financial Reporting Standards regime, City AM reports.

Local Authority Pension Fund Forum, GO Investment Partners and the UK Shareholders’ Association have also backed the paper, which will be delivered to Financial Reporting Council, Department for Business, Energy and Industrial Strategy, the Bank of England and the Institute of Chartered Accountants in England and Wales, and other organisations.

“Investors need to know what portion of a company’s profit has been realised, and what portion has not. Understanding the level of unrealised profits is important to judging the reliability of a business’s income stream,” the paper says.

Landell-Mills says poor accounting standards were one of the contributing factors to the global financial crisis and it a surprise that this has not yet been addressed.