Major investment groups have banded together to call for changes to company reporting standards.
Legal and General Investment Management, Columbia Threadneedle Investment Management, Hermes Investment Management and Sarasin and Partners said firms should be required to reveal how much of their profits are unrealised.
A paper compiled by the fund houses said: "Investors need to know what portion of a company’s profit has been realised and what portion has not. Understanding the level of unrealised profits is important to judging the reliability of a business’s income stream."
Unrealised profits are those which have not yet been taken, for example if a firm held company shares which had risen in value but had not yet sold the shares to crystallise the gain. Often called a ‘paper gain’, unrealised profits are not taxable.
The group of investors wants to see a shake-up of the International Financial Reporting Standards regime.
They will send a paper to the Financial Reporting Council, Department for Business, Energy and Industrial Strategy, and the Bank of England among others.
