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“The challenge that regulators face is to tackle mal-practice and lack of transparency without stifling the economy and laying down unnecessary red tape for entrepreneurs” Mr McCreevy said. “I believe that the establishment of the Corporate Governance Forum Group will help facilitate convergence in corporate governance standards without necessarily requiring legislative action at EU level“.
“The view that more frequent reporting by companies increases transparency is one about which I am deeply sceptical.
“Take a branded goods business. Put it on a brand investment diet for a short time – say one accounting period. That will save costs and boost margins – for that accounting period. But in the next accounting period margins, brand equity, and sales will suffer.
“Take a service business. You can skimp on investment in staff training and investment and thereby boost profits in one period. But probably at the expense of customer service quality, loyalty, and profitability in the following period.
“Take a manufacturing business. You can stuff distribution channels to the benefit of sales and margins in one accounting period. But it will surely be at the expense of those same sales and margins in the following period.
“Take any balance sheet. By manipulating working capital, a company balance sheet that looks cash rich at the end of one quarter could be facing a liquidity crisis in the following quarter.
“That is to say nothing of the manipulation opportunities from capitalization of expenses as assets in the balance sheet that might more appropriately have been expensed as costs in the profit and loss account.