Independent Newspapers has decided to make a once-off reduction of £360 million (€457 million) in its reserves in the current financial year unless the new accounting standard - FRS 10 - is changed. The move will dramatically alter the group's balance sheet. It will reduce the size of its balance sheet by almost one-third and more than halve shareholders' funds. Because of the reduction in shareholders' funds, gearing will increase from about 78 per cent to over 200 per cent.

Under the new accounting rule, the group has to take the value of the titles it has developed off the balance sheet. They are currently included as intangible assets at a value of about £360 million. Bought-in titles valued at a total of £473 million on the group balance sheet at December 26th, 1997, will not have to be reduced or written off as long as the group's auditors are convinced that there has been no diminution in the value at which they are included. The decision to write off the value of the developed titles directly against reserves was confirmed by group auditors PricewaterhouseCoopers. It follows the practice adopted by the Mirror Group in the UK in response to the new accounting standard which came into effect on December 23rd, 1998. Writing off the value of the titles against reserves means that the new standards will not reduce group profits.

Earlier this week, Independent announced that it was changing its financial year end from December 25th, 1998, to December 18th to avoid having to comply with the new standard. The group disagrees fundamentally with the new rule, arguing that its titles have a value reflecting many years of investment.

In its statement announcing the change of year end, Independent stressed that the implementation of the new standard "will have no effect on the recently announced £380 million refinancing arrangement, which ensures sufficient funds both to implement the recently announced restructuring plan and further appropriate acquisitions.