EMBELLISHING a company's bottom line will be extremely difficult in future because of the introduction of a new accounting concept framework, Coopers & Lybrand says. The draft of the framework for the preparation and presentation of financial statements by the Hong Kong Society of Accountants, now under consultation, would serve as an umbrella framework for all accounting standards and it could change existing accounting policies substantially, the accounting firm said. 'It is very important as it will set the scene, or the background of all accounting standards in the future,' a Coopers & Lybrand partner Roger Knight said. The new accounting framework, which laid down only the principles of accounting standards, gave clearer definitions of basic accounting concepts such as liabilities, assets, income, expenses and equity. Tax principal Colin Chau said: 'The existing definitions of these concepts are blurred and vague and the new concept principles give much clearer definitions for them. 'There was no ruler before and now they [the concept principles] are providing a ruler for measurement.' The new concept principles outlined the requirements for information in a financial statement - they should be comprehensible, relevant, reliable and able to be compared. While the new concept principles would give a fairer view of the financial position, performance and cash flow of a company, they also meant that companies would be less able to embellish their results. 'The framework is good for all the users of the accounting statements,' Mr Knight said. 'But it also narrows their options in some areas. 'It will be more difficult for companies to smooth their results.' The framework was expected to affect the policies of deferred liabilities, deferred assets and deferred expenses. Mr Knight said the accounting standard for pension costs, expected to be issued by the society of accountants soon, probably would be affected by the concept principles. Hong Kong companies do not recognise pension costs for their staff now, but would have to recognise the cost as liabilities in the future. Another example would be deferred expenses such as moving costs. A company can now offset the cost of moving its office with the benefits to be derived from the new location. Under the new principles, a company would have to book the expenses in the profit and loss account as the benefits derived from the new location could not be quantified and therefore would not comply with the principle of reliability. Mr Chau said investment properties might have to be depreciated under the new principles as the existing practice, which required investment properties for lease for 20 years or less to depreciate, was merely arbitrary. Coopers warned that one set of financial statements might not be able to satisfy all the needs of industry, because the new principles were an attempt to cater for the needs of all users and to apply to all companies The firm urged the society of accountants to consult business far more widely about the concept principles.