Benchmarking and other comparisons within industry sectors are all the rage at present. But, quite apart from any management reluctance there may be to go along with such initiatives, they may be of limited use - for the simple reason that different companies may have significant differences in approach towards accounting policies and the like.
A report just out from the accountants Arthur Andersen makes the point vividly with regard to retail companies. For example, the research undertaken by the firm's UK retail group indicated a certain variation in the way that the pre-opening costs of new stores - such as rent and rates, staff recruitment, training and advertising and promotional activities - are dealt with in the accounts.
Seventy-eight per cent of those taking part in the survey treat all such costs as "period expenditure", and only 11 per cent adopt a policy of capitalising all of the costs. The remaining 11 per cent capitalise some of them. Typically, those capitalised are pre- opening rent and rates and staff-related costs, although there is a range of combinations to be found. There is also significant variation in the period adopted for depreciation of such costs. A quarter of those capitalising adopt a depreciation period of less than two years, while a similar proportion opt for a period of more than 10 years. Most of the rest use five-to-six-year depreciation periods. Similarly, there is variation when it comes to providing for rent on vacant properties and shortfalls on sub-lease income. Only 40 per cent of those encountering such problems provide for any future rent costs on vacant properties, and only 39 per cent make provision for shortfalls on sub-lease income. Even where provisions are made, the bases used vary greatly between companies. …