Company Reporting and the FRRP

There is a high correlation between the work of Company Reporting and that of the Financial Reporting Review Panel (FRRP). Indeed, we pick up 75% of those companies that come before the FRRP an average of nine months before hand. Below are the main highlights of the relevant stories. Just click on the link to read more.

Artisan (UK) plc Given that it is generally accepted practice to capitalise and amortise goodwill, we were surprised to see that Artisan had elected to write off goodwill to reserves - £3 million goodwill went straight to merger reserve ! Avesco plc In September 2000, Company Reporting noted that Avesco acquired an associate. Unusually, the £4.6 million consideration paid was not cash or shares, but tangible fixed assets with £4 million goodwill arising on the transaction. However, the fair value disclosures were not up to scratch. Finelot plc Finelot finds itself in discussion with the FRRP in respect of magazine costs which it capitalised as research and development. The Panel took issue with this treatment concluding that these costs were not R&D. Groupe Chez Gerard plc We highlighted this case in January 2001. It concerns Groupe Chez Gerard's adoption of FRS 15 "Tangible fixed assets" and its revised depreciation policy. Liberty International plc Liberty found itself in trouble with the Panel for its goodwill policy such that no negative goodwill was recognised on an acquisition.  However, its was the action that followed that we found most interesting. To avoid the negative goodwill,  and with the Panel's blessing, Liberty has written the negative goodwill straight to reserves invoking the true and fair override to by-pass FRS 10 "Goodwill and intangible assets". Northgate plc Our attention was first drawn to Northgate's treatment of volume related bonuses which was altered upon adoption of FRS 15 "Tangible fixed assets". Our analysis highlighted that Northgate's new policy was in breach of FRS 15. Royal Bank of Scotland Group plc An analyst drew our attention to how Tesco Personal Finance Group Ltd (Tesco Finance) was accounted for by Tesco plc and The Royal Bank of Scotland Group plc (RBS). RBS claimed it had full control over the investment. Conversely, Tesco indicated that it had a share of control. Our conclusion in December 2003 was that one of the shareholders was accounting incorrectly for this investment. This conclusion has been confirmed following an investigation by the Financial Reporting Review Panel and RBS now treats its investment as a joint venture. Seymour Pierce Group plc In September 2003, Company Reporting concluded that the fair value treatment adopted by fund manager Seymour Pierce did not follow FRS 7 "Fair values in acquisition accounting". In July 2005, the FRRP reached a similar conclusion. Wiggins Group plc Certainly one of the most indepth discussions ever undertaken by the FRRP, the case with Wiggins almost led to the FRRP taking full blown legal action for the first time ever.

© Company Reporting 2008