The evolution of accounting practices for UK commercial service charges: evaluating the impact of the RICS professional standard

What the paper says

Purpose This paper aims to provide analysis on the state of UK commercial service charge accounting practices when the guiding regulatory framework changed to a mandatory professional standard. Design/methodology/approach From a critical review of the accounting requirements of the Royal Institution of Chartered Surveyors (RICS) Professional Standard, the paper develops metrics for measuring the quality of service charge accounts. These metrics are used to measure accounting quality within 154 accounting statements prepared during the first year of the Standard’s implementation. Findings The paper identifies conceptual weaknesses in the RICS Professional Standard and poor levels of compliance with many of its accounting requirements. The findings suggest that long-standing issues remain unsolved and also identify new areas of concern within present accounting practices for UK commercial service charges. Research limitations/implications The data were obtained from accounting documents prepared by 68 landlords and 40 managing agents for the commercial clients of one UK service charge consultancy company. Although the population is representative of industrywide practice, further longitudinal analysis is required to improve generalisability. Practical implications The paper provides performance metrics that stakeholders can use for benchmarking accounting quality. The RICS needs to act to improve accounting practice or risk government intervention. Some corporate landlords must provide higher quality service charge accounts or risk potentially losing occupiers to competing schemes. Originality/value This work provides a unique dataset that explores the role of the RICS Professional Standard in improving UK service charge accounting practices.