PracticeConsultingUndervalued assets outcry

Undervalued assets outcry

Accountants and MPs warn #33m balance sheet uplift in Devonport and Rosyth docks sale could double ship costs.

Public-sector financial experts and MPs have expressed deep concern about the accounting practices used in the sale of the Royal dockyards at Devonport and Rosyth to their operators.

Public Accounts Committee members were ‘deeply sceptical’ whether the taxpayer would benefit from the purchase of the yard by Devonport Management and Babcock Rosyth Defence. MPs were concerned that DML at Devonport obtained agreement from the Ministry of Defence to take ‘the dockyard assets into their balance sheet at a value of #33m higher than the consideration paid’.

The fixed assets were sold to DML for #40m but the fixed-asset value was agreed at #73m. The committee said this could lead to improvements in the labour rates for refit work being ‘outweighed by the higher depreciation and profit elements in refit prices’.

The committee’s report, published last week, said: ‘One reason given to us by the department was that such an accounting treatment would enable the new owners to fund their future capital expenditure through higher depreciation, yet by the department’s own assessment the company over-estimated the capital spending requirement’.

One public-sector specialist said the deal meant the shipyards were effectively sold at a knock-down price. ‘The problem with this comes as the government would be paying twice by giving the assets away at a less than market value. When you come to buy ships from that yard you would be paying a price which included that asset value,’ he said.

Committee chairman David Davis said: ‘The department points to potential savings but they are shrouded in uncertainty, whereas the future liabilities are all too real. The department has failed again to get to grips with major works projects and deliver them to cost and to time.’

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

5m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

12m Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

12m Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

12m Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

1y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

1y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

1y Stephanie Wix, Writer