Corporate governance - Clear benefit in open reports.

(From Financial Director)

Byline: Peter Bartram.

When the Centre for Financial Research and Analysis (CFRA) raised doubts about the way that outsourcing specialist Capita Group was accounting for certain expenses last summer, Capita's share price dived. The CFRA's comments came at a time when the market was already jittery about support services firms. For example, Amey's share price had gone into freefall after it admitted that new accounting standard UITF 34 would hit earnings.

But Capita's executive chairman, Rod Aldridge, wasn't prepared to see his company suffer the same fate as Amey. The central question was how the company treated bid costs in its accounts. The new standard required firms to take them as a cost through the profit and loss account. The market's worries were that Capita hadn't been doing that and, like Amey, it would take a nasty hit in its bottom line.

Capita's financial results were due within days of the CFRA's comments.

It immediately issued a statement: "As part of the interim results presentation, Capita will demonstrate that it has consistently adopted more conservative accounting policies than those required by the relevant accounting standards."

The statement was enough to make the company's share price bounce back 3% to 254p. It had originally fallen from around 300p. Analysts and financial journalists were called to meetings to reinforce the message that Capita was committed to maintaining a "cautious and prudent approach".