BusinessCompany NewsError found in Furniture group’s accounts

Error found in Furniture group's accounts

The Financial Reporting Review Panel has issued a report on furniture and catering hire group Thorns after finding fault with its depreciation policy.

Link: One in seven accounts faces FRC scrutiny

The panel took the company to task over its decision not to charge depreciation on hire stock of £3.581m. Thorns claimed that the value of the stock was maintained through the replacement of broken and obsolescent item on a consistent basis.

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The justification was not accepted by the FRRP, which said that FRS15 states the only grounds for not charging depreciation on tangible fixed assets are that the depreciation charge and accumulated depreciation are immaterial. The standard particularly clarifies that a tangible fixed asset’s life cannot be extended limitlessly through maintenance, refurbishment, overhaul or replacement.

The directors of Thorns have accepted the panel’s decision and have introduced a new accounting policy, backdated to 1 May 1999, which reduces opening reserves at 1 May 2001 by £295,968 and charges depreciation of £223,717 during the year to 30 April 2002.

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