Tube forced into £5bn accounts change
A change in accounting procedures pressed on London Underground by the financial reporting watchdog has forced the tube operator to make a £5bn adjustment to its balance sheet.
LUL has been told by the Financial Reporting Review Panel that it did not accept some of its accounting practices and must change the way it records government grants.
Following an FRRP review of the 1998/99 accounts, LUL has had to move £4,896m from ‘capital employed’ to ‘deferred income’.
LUL had dealt with the grants using the same procedures as the Department of Environment, Transport and the Regions, which has special accounting dispensations.
Wrapping LUL’s knuckles, the financial reporting watchdog said it did not have the same privileges.
A statement from LUL said: ‘This is a technical accounting change and has no impact on the financial substance of LUL.’
It goes on to say the grants were fully disclosed in the 1998/99 accounts which it says were supported by the DETR and KPMG, the external auditor, who declined to comment.
LUL said the change would not effect investment and had no effect on its assets.The FRRP ruling follows a complaint reported in Accountancy Age in March when Smith Williamson partner John Newman claimed LUL had overstated its assets. That complaint was rejected.
An FRRP statement said: ‘The directors now concur with the Panels and, in their March 2000 accounts recently published, reclassify all grants received as deferred income and accordingly take account of such amounts in determining net assets.’
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Accountancy Age exclusive: Tube accounts ‘misleading’