LONDON A group of British local government pension schemes has escalated its effort to change the way companies report by asking boards of the biggest 350 listed firms to disregard certain guidance from the accounting regulator.
The move is the latest attempt by the Local Authority Pension Fund Forum to fix what it says is an error in the way the Financial Reporting Council advises companies to interpret company law, in a disagreement dating back to 2013.
"The mistaken position that results is that companies can keep two 'sets of books' in order to discharge the 'net asset' and 'distributable profits' tests of company law," LAPFF Chairman Kieran Quinn told Reuters.
"But this leaves shareholders and creditors in the dark as to what the fundamental position relevant to solvency and lawful profits actually is," added Quinn, whose group oversees $175 billion (£117 billion) in assets on behalf of local government workers.
The LAPFF argues that this would mean many dividends paid out under the FRC guidelines were unlawful, leaving directors liable, said Tim Bush, spokesman for Pensions & Investment Research Consultants, which is assisting the LAPFF.
Flagging comments from the Department for Business, Innovation and Skills that the FRC was correct in its interpretation of company law, an FRC spokesman said the LAPFF letter deals with "a very narrow point of company law" in terms it cannot support, and which raised "unnecessary uncertainty".
"The FRC and the government have confirmed that the Companies Act 2006 does not require the separate disclosure of a figure for distributable profits," the spokesman added.
(Reporting by Simon Jessop; editing by Susan Thomas)