Reviewing the FRC

The invitation to contribute to the Kingman review of the FRC published today mentions in passing that the FRC was established after Ron Dearing’s 1988 report “The Making of Accounting Standards”. I can’t find my copy but I remember the cover – glossy red with an overall design based on the word “red” in fancy lettering. I was told by an ICAEW employee at the time that this design was requested by Dearing as it was not only the colour of the cover but also his initials. 

Not long after, ICAEW published a further report with a red cover. This was written by Professor David Solomons. I still have my copy. It is a much more sober publication printed in a very small font and it contains a detailed and scholarly analysis of the conceptual and theoretical aspects of accounting standards.

The Dearing report addressed the structure of accounting standard setting: Solomons addressed the content of the standards themselves. Both are fundamental to the issue of trust in corporate reporting and I think they need to be addressed at the same time. How can we judge whether the FRC is fit for purpose in its role as guardian of  corporate reporting and corporate governance, without considering whether both corporate reporting and corporate governance are fit for purpose?