THE INVESTING PUBLIC

Wanganui Chronicle, Volume 80, Issue 265, 8 November 1937, Page 9

THE INVESTING PUBLIC

A PROTECTIVE MOVEMENT Many people in New Zealand art concerned with some points raised recently by Mr. Walter Holman, president of the British Society of Incorporated Accountants and Auditors. He declared that in all cases of offer of shares to the public the available information should be sufficient to enable the real value to be estimated. “I think the influence of the accountancy profession,” he said, “could do something to bring an improvement in this direction, as it cc tainly has In the form and content >f published accounts, and if that in ’ARice were reinforced by additional -uuirements in the direction indicated i ;• the committee of the London Stock Exchange before granting permission to deal, a further step would have been taken to protect the public. And I feel that such a step is called for now because I can forsee that a danger may arise such as has been inherent in conditions in the not very distant past—the danger of attempts to raise new capital on the basis of profits which are temporary in character or to effect capitalisation on the basis oi boom profits. I know that the tendency is for shares to be valued for prospectus purposes on the basis of earnings yields. This is an important factor, but it should not be allowed to become dominant and virtually to exclude other important factors. Of these factors, I shall mention only one by way of illustration, namely, the actual value as a going concern of the assets to be acquired. I think it is important to stress these matters because I do not regard the recent lack of activity in the. capital market as anything other than short-lived.

“In cj.'der to avoid possible misunderstanding, I must disclaim any intention of advocating the estimating of future profits by accountants. Excursions into the realms of prophecy are outside the scope of our professional duty, but I am suggesting that we shall have the right and the power to interpret the past in the light of the future commitments which are known. The caution whica is rightly characteristic of us as accountants may in the past have given the impression that our general attitude towards the problems of industry and commerce is negative rather than positive. In so far as that impression is justified, we are contributing less than we can to those who have the right to look to us for assistance and guidance. I am anxious that the society shall make its full contribution and that our members shall be trained and equipped adequately to fulfil their tasks—tasks which are certain to increase in magnitude and complexity.” The president mentioned that this protective movement was inspired by “the more progressive elements in the profession.”