Not so Wilde about this Scrooge approach to holidays...

Did you enjoy your Easter break? I hope so because the Centre for Economics and Business Research (CEBR) reckons that our 8 (or 9 depending on royal celebrations) bank holidays cost the UK economy around £19billion. 

It seems that the spirit of Scrooge has clearly moved beyond the festive season and is now pursuing us all the year round. If that is what bank holidays cost, think what the statutory annual leave must cost. Hey, why don’t we go the whole hog and add in weekends?

The only surprise is that this piece of research wasn’t compiled by a firm of accountants because, as everybody likes to believe, those unemotional beancounters are the ultimate business cost cynics, epitomising Oscar Wilde’s dictum of knowing the price of everything and the value of nothing. 

Actually good accountants, in their guise as Finance Directors, do not focus on the cost of everything. They seek to understand how the products and services offered by their businesses create value, realising that this is how real profit and cash is generated.

The valuation of such products and services, and beyond that the valuation of a business for sale, involves a lot more than just looking at the tangible cost elements. As can be seen when valuing houses a variety of factors get taken into account, not just the bricks, mortar, land and other materials.

Invariably valuation is in the eye of the beholder. Most employees see the value in their holidays, which is why they are much appreciated and jealously guarded. I suspect the impact of this value is considerably more than £19billion.

Maybe the issue is that bosses need to take more holidays (cue shedloads of comments about how difficult it is for a small business owner manager to take any holiday). Or perhaps the CEBR should themselves take a break…….

A question of balance….

It was the accountants what done it you know. Pushed the world into recession that is. If they had not forced the banks to value their more esoteric financial assets at market prices they would not have got into the mess that they did. They should have simply let things be.

However accounting standard setters are definitely not letting things be any more. Over the past few weeks I have attended Finance Director briefing sessions from accounting firms Smith and Williamson and Crowe Clark Whitehill, and have been updated on the latest proposals to “improve” financial reporting, proposals which to me as a qualified accountant seem mind blowingly complex. These include a brand new set of accounting standards for SMEs based on international accounting standards (FRSME), and the prospect of short term leases for items such as photocopiers being treated as finance leases and therefore creating additional balance sheet liabilities.

What all this will mean to the average businessman who is just trying to work out how well his business, or that of his competitor, is performing heaven only knows.The government may be trying to operate a “one in one out” policy as regards regulation but the world’s accounting standard setters seem determined to load even more burdens on companies large and small.

And yet it all used to be so simple. When the father of accounting, Franciscan friar Luca Pacioli developed double entry bookkeeping in the fifteenth century, it established a balanced approach to accounting that has served businesses well for centuries. Goethe, no less, described it as "one of the most beautiful discoveries of the human spirit."

Today Pacioli would be spinning in his grave at the horror of what financial reporting has become. For example HSBC’s annual report is now around 400 pages long and frankly there is no way even the most diligent highly paid analyst can grasp everything that is in there let alone distill it into an easily digestible investment note for public consumption. Hence the lazy headlines that tend to accompany most profit reports nowadays as journalists latch onto the number that best illustrates the point they want to make.

Accounting should always aim for simplicity. If double entry cannot handle a transaction without stacks of rules and guidance then one has to question if it is actually an economically worthwhile transaction. Perhaps if this has been the attitude during the boom times some of the economic fall out of the past few years could have been avoided.

Meanwhile back to those poor bankers. Must be tough being blamed for something that isn’t their fault eh? Still at least they have this year’s bonuses to console themselves with……