29th Nov 2007 08:30
Financial Reporting Review Panel29 November 2007 Financial Reporting Review Panel Aldwych House, 71-91 Aldwych, London WC2B 4HN Telephone: 020 7492 2300 Fax: 020 7492 2479 www.frc.org.uk/frrp FRRP PN 107 29 November 2007 PRESS NOTICE Findings of the Financial Reporting Review Panel in respect of the accounts of Grainger Trust plc for the year ended 30 September 2006 The Financial Reporting Review Panel ("the Panel") has had under review thereport and accounts of Grainger Trust plc ("the company", now Grainger plc) forthe year ended 30 September 2006. During the period in question, the company transferred trading properties with acarrying amount, at cost, of £43.5m to a Jersey Property Unit Trust ("the JPUT"), a wholly-owned subsidiary of the company at 30 September 2006. On transfer,the properties were reclassified as investment properties and a gain onrevaluation to market value of £23.5m was recognised in the income statement. The Panel was concerned about the reclassification of these properties. IAS 40 "Investment property" limits the circumstances in which transfers to, or from,investment property can be made to those circumstances, specified in thestandard, that provide evidence of a change in use. No such change in useattended the company's transfer to the JPUT. As a result of discussion with the Panel, the directors have agreed that thetransfer did not comply with the requirements of IAS 40 as it did not provideevidence of the required change in use. In their 2007 preliminary announcement released today, the directors state thatthey have conducted a considered and detailed review of all of the group'sproperty assets. As a result of their review, the directors have concluded that,amongst other findings, the properties selected for transfer to the JPUT wereoriginally acquired for the purpose of long term capital appreciation and rentalgrowth and, consequently, should always have been shown as investment propertyrather than trading stock. This error has been corrected by a prior yearadjustment, restating the opening 2006 balance sheet (i.e. at 1 October 2005)and the income statement for the year ended 30 September 2006. The total value of the assets reclassified in this prior year adjustment amountsto £67m out of Grainger's total property portfolio valued at £2.0bn at 30September 2006. The correction results in the reduction of the 2006 reportedprofit after tax by £16.5m. Together with the effect of other changes describedin the company's announcement, the 2006 profit after tax reduces from £50.5m to£33.5m with net assets reducing by £0.5m to £250.1m. The Panel welcomes the action taken by the directors today. On the basis thatthe required adjustments are made in the full published accounts for the year to30 September 2007, the Panel regards its concerns as satisfied. Notes to Editors: 1. The Financial Reporting Council (FRC) is the UK's independent regulatorresponsible for promoting confidence in corporate reporting and governance. Itsfunctions are exercised principally by its operating bodies (the Committee onCorporate Governance, the Accounting Standards Board, the Auditing PracticesBoard, the Board for Actuarial Standards, the Financial Reporting Review Panel,the Professional Oversight Board and the Accountancy & Actuarial DisciplineBoard). 2. The role of the Panel is to examine the annual accounts of public andlarge private companies to see whether they comply with the requirements of theCompanies Act 1985 ('the Act'), including applicable accounting standards.Following implementation of the Accounting Regulation (EC) No. 1606/2002, thismay mean compliance with UK or International Financial Reporting Standards. 3. Where breaches of the Act are discovered the Panel seeks to takecorrective action that is proportionate to the nature and effect of the defects,taking account of market and user needs. Where a company's accounts aredefective in a material respect the Panel will, wherever possible, try to securetheir revision by voluntary means, but if this approach fails the Panel isempowered to make an application to the court under section 245B of theCompanies Act 1985 for an order for revision. To date no court applicationshave been made. 4. The Chairman of the Panel is Bill Knight and the Deputy Chairman, IanBrindle. There are currently 29 other Panel members drawn from a broad spectrumof commerce and the professions. Individual cases are normally dealt with byspecially constituted Groups of 5 or more members. All Press enquiries should be directed to: Carol Page tel: 020 7492 2460 or [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Grainger plc