The Financial Reporting and Review Panel, which will investigate the accounts of companies in the automotive, pharmaceutical, retail, transport and utilities sectors, played down the potential risks of dealing with such businesses.
The move follows a warning from a credit insurer that, following the FRRP’s announcement, companies acting as suppliers to these industries should take out additional protection against bad debt.
‘If a major body like the Financial Reporting Council is saying that a selection of companies in these industries are at risk of accounting errors, then it follows that the chances of insolvencies are higher,’ said Tony Garner, business development manage at Atradius.
‘We’re still capable of seeing major failures coming out of nowhere and if you look at the five industries mentioned by the FRRP there are a lot of problems out there aside from IFRS,’ Garner added.
Defending the FRRP’s decision, Carol Page, director of panel operations, said: ‘It’s just that those industries have been under particular stress or strain during the last year. No one, I think, would particularly disagree with that.’
She added that there were no additional concerns and suppliers should not change the way they deal with these companies as a result of the FRRP’s actions.
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