In a statement, the Financial Reporting Review Panel said it had considered report and accounts of PWS Holdings PLC for the year ended 30 September 1998 and has discussed them with the company’s directors.
The company is audited by Mazars Neville Russell.
The FRRP said: ‘The matter under discussion was the presentation, in the company’s profit and loss account, of the goodwill amortisation charge. This was not included within the heading ‘Depreciation and other amounts written off tangible and intangible fixed assets’ but disclosed as a separate line item between the two sub-totals ‘Operating profit before exceptional operating items’ and ‘Operating profit after exceptional operating items’.
‘ The charge of £45,000 was described as a ‘Net exceptional operating item’.
‘ There were two aspects to the Panel?s concerns. First, Financial Reporting Standard (FRS) 3 ‘Reporting Financial Performance’, defines exceptional items as ‘material items which derive from events or transactions that fall within the ordinary activities of the reporting entity and which individually or, if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence if the financial statements are to give a true and fair view’.
‘ In the Panel’s view, the £45,000 amortisation charge should not have been classified as an exceptional item, by virtue of either size or incidence.
‘ Secondly, in the Panel’s view, it was not appropriate that a new line item ‘Operating profit before exceptional operating items’ be introduced in circumstances where an amortisation charge falls to be reported as, in the Panel’s view, operating profit is to be found after taking account of such an item.
‘ In the light of their discussions with the Panel the directors have decided to accept the Panel’s view. In the preliminary announcement published today the directors have included amortisation of goodwill within trading expenses as a non-exceptional item and have adjusted the comparatives for 1998 accordingly. The Panel welcomes the decision announced by the directors and regards its enquiry into the company’s 1998 accounts as concluded.