FRRP orders Eurovestech to amend its accounts
FRC review body rules that AIM-listed venture capital group should consolidate two of the investments on its books
A Financial Reporting Review
Panel probe into
Eurovestech’s
accounts has called for the venture capital group to consolidate two of the
investments in its accounts.
FRRP rejected Eurovestech’s claim that the subsidiary undertakings that
appeared on its balance sheets had not been consolidated because it would not
give a true and fair view of the company’s interest in these investments.
Eurovestech had explained that its venture capital investments (which are
subsidiary undertakings) were carried in the balance sheet in accordance with
the company’s normal policy on valuation. It outlined that the investments were
held exclusively for resale within the company’s portfolio, and with a view to
the ultimate realisation of capital gains, although not necessarily with a view
to disposal within the year of acquisition as required by
FRS
2.
An FRRP statement said: ‘Consequently, the directors considered that
consolidation would not give a true and fair view of the company’s interest in
these investments, and invoked the true and fair override in order not to
consolidate them in the group accounts.
‘While the Panel accepted that the directors had acted in good faith, it did
not accept the use of the true and fair override in this case as the company was
unable to demonstrate special circumstances warranting a departure from the
requirements of the accounting standard. The two subsidiary undertakings in
question accounted for more than 50% of the company’s portfolio, and had
directors appointed by the company. The Panel was of the view that the
subsidiary undertakings should be consolidated within the Group accounts.’
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