Paul Stanley levelled the charge after examining the revenue recognition policies of the failed insurance company, which went into liquidation in January. He said he believed much accounting was ‘massively imprudent’.
‘My personal view is that the income recognition is all wrong, and it encourages people to think they’ve made a massive amount of profit when actually they haven’t. It can therefore only end up in tears,’ said Stanley.
He expressed concerns about revenue being recognised from day one of a transaction. ‘The fundamental principle is that you haven’t earned until you’ve done your job,’ he added.
November saw the launch of FRS5, which is intended to deal with revenue recognition and expected to have a particular impact on insurance intermediaries. Experts have warned the industry to heed the new rule or face problems later.
Meanwhile, insurance industry figures have complained about the introduction of FRS5, which applies to accounts for 2003. Eric Galbraith, chief executive of the British Insurance Brokers Association, said: ‘What is disappointing is the low profile given to the consultation and the lack of time given for implementation.’
Despite warnings, the Accounting Standards Board said it has had little feedback from the industry in the run-up to the launch of the new standard
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies