PracticeConsultingNorthgate hit by £48.8m restatement

Northgate hit by £48.8m restatement

Commercial vehicle rental company Northgate plc has been forced to reduce its 2001 turnover figure by £48.8m in a restatement forced by the UK's financial reporting watchdog.

The move, which arose after the Financial Reporting Review Panel intervened over its accounting policy for vehicle-related bonuses, was unveiled today as the company announced its 2001 preliminary results.

Discussions between FRRP officials and company directors led to these volume-related bonuses from manufacturers to be reclassified as a reduction in the cost of acquiring vehicles.

The effect of the change in policy, under the rules of FRS 15 which deals with fixed assets, is to reduce both turnover and depreciation for the period to 30 April 2001 by £48.8m.

In addition, on the balance sheet, the net book value of the fixed assets was reduced by £54.2m. 2000 figures were also restated.

The FRRP said: ‘We took the view that, to conform to FRS 15, the bonuses should have been credited to the purchase price of the vehicles whose purchase price triggered the bonuses.

‘The effect of the bonuses would then be to reduce the charge for depreciation over the useful economic lives of the assets. Accordingly, the bonuses should not have been recorded as deferred income or released to turnover.’

The company’s net profit figure, however, was unaffected, and the company’s results showed growth in both turnover and profits. Its results statement emphasised that the changes had no effect on operating profits.

Northgate’s finance director is Phil Moorhouse.

The FRRP’s ultimate sanction is to take companies to court. However, it normallysucceeds in getting company’s to change their accounting policies by discussions with directors.

Links

www.frrp.org.uk

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