Allen & Overy Under the GAAP Microscope

"As a profession, if we are to be taken seriously, we need to move to a sensible reporting regime that is based on real figures, and not on those stage statistics that appear."  The words of an impractical academic?  A frustrated journalist rattling the cage of law firms' secrecy?  Try Guy Beringer, Allen & Overy's senior partner, announcing the public release of fully transparent, GAAP-compliant, detailed financials for the firm, including individual partner-by-partner compensation—a potentially revolutionary development. 

It gets better:  Beringer insists the rest of the Magic Circle do likewise, if they want "to be viewed as competent international businesses."

Lest we get ahead of ourselves, A&O's admirable move comes on the heels of their conversion to LLP status last year which, in the UK, entails mandatory disclosure of these figures:  But they're not whining.  To the contrary:

David Morley, managing partner of A&O, said: "There is a trade-off between the limited liability wrapper and disclosure and we think it's a fair trade-off. We hope we are setting the standard for the profession."

Additional coverage from The Lawyer is here and here; I've also requested a copy from A&O directly.

When other firms remove their cloaks, will we see untoward changes in the profits-per-partner rankings? Does the Sun rise in the East?

Update as of 5:15 pm:  Here's the press release announcing A&O's results, which contains a severely condensed income statement and balance sheet if you scroll down a bit.   Highlights:

• The firm is focusing on productivity.  While the total number of lawyers was down slightly, productivity rose, permitting revenue to grow by 2%.  Combined with driving costs down by 1%, total profit was up 8% and PPP was up 5%.
• North America and China are viewed as the "key growth markets."
• Pro bono receives genuine resources:  50,000 lawyer hours, or £12-million of billable time.
• The largest single expense is "staff costs" at 41.2% of revenue-no surprise whatsoever.
• Second is "other operating charges," which (although they don't say so) is office rent and associated costs such as telecom and utilities.
• No other expenses are material.
• Leaving a gross profit margin (before taxes) of 36.7%, which is handsomer than even Microsoft territory.