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Company Reporting is a monthly journal available in both paper and on the web which monitors the financial reporting practices of UK companies. It is available on subscription only, and a sample copy of the paper version can be obtained from Edinburgh based research organisation Company Reporting Ltd.

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News Release

Not for release before 0100 hrs on 3 May 2004

FRS 17 Pension Assumptions

Aston Villa substantially boosts its debt equity ratio following its decision to reclassify £21 million of debt as equity, according to accounting watchdog Company Reporting (www.Company Reporting).

Aston Villa has implemented new accounting rule UITF 33 "Obligations in capital instruments" and consequently a convertible interest free loan of £21 million is reclassified as other shareholders' funds all but wiping out the company's long-term debt.

The reason for the reclassification is that repayment of the loan when it expires in 2005 is remote as it will be converted into share capital. Under UITF 33, such a loan need not be classified as debt where there is no realistic expectation that it will be repaid.

The consensus reached in UITF 33 promotes substance over legal form. Indeed, it resolves the conflict between two other accounting rules, FRS 5 "Reporting the substance of transactions" and FRS 4 "Capital instruments", preferring the stance taken in FRS 5.