‘Safe’ hands for businesses

Sunday 8 October 2006

A new research network for academics and professionals in accounting, economics and finance is being launched at the University of St Andrews. It is hoped that the new network will produce research that will provide new frameworks for businesses, helping them be more innovative, more profitable and easier to run.

The new body, SAFE (Seminars in Accounting, Finance and Economics), aims to provide a bridge between the professions, academia, industry and government and will encourage researchers to view businesses from a combined economics, accounting and finance perspective.

This ESRC (Economic and Social Research Council) funded network will be Chaired by Professor Gavin Reid, of the School of Economics & Finance at St Andrews. Joint grant holder, Dr Julia Smith of Strathclyde Business School, will act as Treasurer and Secretary.

Professor Reid said: “I have long thought it important not to regard key commercial subject disciplines as being isolated islands. They are actually interlinked – you cannot really understand the commercial side of business without an understanding of the key elements of the three areas of finance, economics and accounting, and how they mutually support each other in rational business analysis and decision making.

“This new network will provide a common arena for those working at the accounting, finance and economics interface. If it generates new findings or results that help small businesses become easier to run, more innovative, or more profitable, it will be benefit commerce as a whole, and thereby the economy and society. This also helps the government identify emerging possibilities for new frameworks for business.”

The new forum being established follows on from another recent ESRC grant awarded to Professor Reid and Dr Smith to explore the merits and de-merits of adopting a new standard for financial reporting for small and medium sized businesses in the UK. The new standard, or protocol, is known as the FRSSE, or, affectionately amongst specialists, as the ‘Frizzy’. The protocol was first introduced in 1995, and an international standard of Frizzy, for all EU linked companies, in 2005. Its goal is to reduce the administrative burden of financial reporting amongst small businesses, by providing exemption from a number of accounting standards. The research will look at whether this has been to the benefit of small businesses or whether it has made running them even more complicated, expensive and time-consuming.

Professor Reid said: ‘The Frizzy seems to have advantages for the small business, but does it really help? Our research will look at how cost-effective the Frizzy is.

‘It’s not an unmixed blessing. So we’ll be asking: how do a range of costs, like compliance costs and opportunity costs, compare to the variety of supposed benefits, like superior financial performance and greater flexibility? We aim to answer this question using the economic tool of cost- effectiveness analysis, applied to accounting systems which themselves are founded on principles of finance’.

Gavin Reid is Founder/Director of the Centre for Research into Industry, Enterprise, Finance and the Firm (CRIEFF), School of Economics & Finance, University of St Andrews.



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Ref: SAFE 091006.doc

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