The Hundred Group's deputy chairman and CFO of Pearson PLC, Robin Freestone, has criticised changes in accounting over the last few years of transition from UK GAAP to IFRS.

'In the transition from UK GAAP to IFRS, a few things have been lost some areas have been obscured, particularly when it comes to assessing management's contribution,' said Freestone.

Freestone was addressing delegates, auditors and accountants who had gathered for Ernst & Young's Financial Reporting Outlook conference, when he also took the opportunity to slam mark-to-market accounting, a model strongly proposed by the International Accounting Standards Board: 'By outsourcing accounting values to an irrational market, haven't we effectively put the arsonists in charge of the fire hydrant?'

Freestone went on to say that he didn't believe spot rates represented fair value, citing pension liabilities and discount rates, bank debts - where debts minus the decline in their value resulted in a credit to P&L statements; and cases in which assets were priced with unsustainable long-term values - as huge areas of concern.

'Movement in the accounts are not helpful. We shouldn't really be surprised when mark-to-market doesn't always do what we expect or serve us well,' said Freestone, adding that averaged fair values can be a lot 'fairer' than spot values.

He said that although IFRS is helping companies to tell the story of their business, a lot more work is still needed, especially in areas such as leverage.

Freestone bemoaned that fact that 'net debt' reporting is no longer a required disclosure, cash on the balance sheet is not equal to cash in the cashflow statement and that there is no real control over distributions/excess leverage as the 'distributable reserves concept has been invalidated and is not reported.

'The thing that is really missing is management's contribution. What are they really contributing? How can we establish what they're doing and how well they're doing it?'

Freestone called for a 'joining the dots' approach, saying there needs to be full reconciliation of the adjusted numbers, with greater consistency of what the adjustments entailed with some standardisation.

Directors, he said, needed to also produce reports that are fair, balanced and understandable.