P.M. slated for his view on accounting

Press, 1 October 1979, Page 2

P.M. slated for his view on accounting

Wellingtor Mr Muldoon's recent vir tual damnation of current cost (inflation) accountinc has appalled Professor Ed ward Stamp, a world expert °n the subject. — ea;and should not stand to see the intrusion oi ■ Politician into a question - . S V. . importance,’' he v? id ,, !t is even worse that Muldoon is an account ant himself. Professor Stamp, a former professor of accounting at ' ‘ctoria University of We!Imgton and at Edinburgh University, is now head of the Internationa! Centre for Research in Accounting in Britain. in Wellington, he noted Mr Muldoon’s remarks on accountancy, made to the Institute of Directors at Auckland two weeks ago. Professor Sharp asked to put on record his concern about Mr Muldoon’s "intrusion into an area where he has no right to tread." "No-one would tolerate a politician’s dictating to a surgeon where he should make an incision during a delicate operation. The politician simply lacks the competence to do so. But the politician does have the right to see how a hospital board spends its allocated public funds,’’ he said. Mr Muldoon had said, in part, that “it matters little whether the accounts of a particular company are drawn up on the basis of historical cost or current tost.” Professor Stamp was also incensed by another statement of Mr Muldoon: “What is required in a system of accounting for results of business enterprises is consistency, rather than reform.’’ Mr .Muldoon also criticised many “company directors who should in my view know better, who advocate current-cost accounting." Mr Muldoon said this was because they believed it would somehow reduce their taxation or enable them to increase prices. "These remarks are an unwarranted intrusion by a politician into a question involving important professional standards. The accountancy profession is

>n the repository of knowledge on t|ie meaning of figures in r- balance sheets — it is an t- area for expert profesg sionals,” Professor Stamp j- said. rt .New Zealand was a world leader in accounting for init flation. he said. The Richardif son committee's inquiry into n the subject had produced a ie "much better reasoned stalest ment on inflation-accounting t- than any similar studies in Britain, the United States, :r Australia or anywhere else it m the world. It was a first I- class bit of work, and far h better than I believed pos>f sible.” ,r The recent statement of n the Governor of the Reserve Bank (Mr R. W. R. White) “ advocating a “sensible” ap!l proach to valuing the dollar ' in accounting for debt, mortgages and financial instruments was of great im0 portance. Professor Stamp praised e the way the New Zealand Society of Accountants had d progressed with the issue, in 3 spite of Mr Muldoon’s sugd gestions to the contrary. a “Mr Muldoon is ignoring J reality when he says in- . Ration-accounting does not: e m a t t e r . Historic-cost i e accounting is inefficient.; I particularly in 15 per cent: j inflation, as you have here.” ' If company accounts were; nito be useful, they must also! s be realistic. They must also! a be free of political in-1 e fluences. f Professor Stamp said that t if New Zealand was to getout of its economic plight a by moving its resources to . where they would be best t used and most profitable, inf flation-accounting was esf sential to give investors and -shareholders correct infor- - mation on the best avenues tor investment. 1 “It is plain silly for Mr s! Muldoon to support a sys- / tern which encourages ins.vestors to put their money r I into the wrong places, for -instance into companies i which are losing heavily ini - real terms in inflationary ; -1 circumstances in spite of ! What their published figures j' • say. i "He should stay out of’i ■ this field . . . Economic real- li • ity cannot be measured by ? historic-cost accounting," I ; said Professor Stamp. 1