Originally posted by Shinboners
I don't think the accounting standards need to be tightened. And anyway, there are so many loopholes that plenty of things can be hidden in a set of accounts.
What needs to be strengthened is the law. If the government can compel all companies to pay money into their workers superannuation accounts, then surely it can't be that difficult to change the law so that all worker entitlements are paid into a trust account with the money being paid out when a company goes bust or the employee leaves the company.
I don't think your suggestion is workable as the liability is unrealised and for 99% of companies (those that don't go broke) it will never be realised. Putting money into a fund this way takes the companies working capital which would then be replaced with debt and a weaker company. It is also a suggestion of horrendous red tape as the redundancy entitlements swing on a weekly basis (daily for the likes of Ansett) and the cost of accounting plus the fund management costs would be a huge drain.
It is not the redundancy entitlements that concern me so much. Employees rank above unsecured creditors. In Ansetts case the employees will get paid out but unsecured creditors will get nothing and many small businesses will go to the wall. What can be done is an annual calculation of redundancy liability and that figure going on the balance sheet. That way a small business can see what would be left if the company went under and they can decide whether to offer credit terms based upon more accurate information.
ps Balance sheets tend to hide profits for tax purposes so are upside apart from this liabilty disclosure