If the interim results released by five listed football clubs over the last week are anything to go by, prudence and caution have become priorities for an industry that nearly became a victim of its own excess.
But although Glasgow Celtic, Sheffield United, Watford, Charlton Athletic and Tottenham Hotspur all made the right noises about cost control and budgets, not one provided any guidance on the impact of international financial reporting standards.
Four of these five, Celtic expected, are listed on AIM and only present final-year figures in June. And with the decision by AIM to extend IFRS compliance to 2007, there is still time to prepare for the new standards. Nevertheless, the change in standards is anticipated to have a substantial impact, which makes the lack of IFRS information surprising.
Last week, Accountancy Age reported that the key wage-to-turnover ratio used to control remu-neration costs would increase under the new standards, but this is just one of the significant adjustments facing football clubs.
One of the most pressing concerns for the industry is that, under IFRS, football clubs will have to beef up the information they disclose.
Charles Barnett, a partner at PKF, said that many clubs will need to disclose far more detail in their accounts than presently required.
‘The information needed from football clubs will be much heavier under IFRS. Clubs will no longer be able to use bland wording and limited detail. IFRS is going to be much stricter,’ Barnett said.
One of the most notable changes expected to emerge from the stricter disclosure requirements will be the policies on how revenue is reflected.
According to Barnett, clubs can have as many as four or five revenue streams that have not been segmented in their company accounts. Under IFRS, however, all these sources of income will have to be reflected individually.
‘Clubs are going to have to show all their income streams and identify the key segments of their businesses. It goes way beyond what they have done previously,’ he said.
Bank and interest covenants will also have to be looked at closely as football clubs make the transition. Clubs with more than one class of stock will have to reclassify certain preference shares from equity to debt, which could see them fall foul of their bank and interest covenants.
‘Clubs will have to approach their bankers and make amendments to covenants if necessary,’ Barnett said.
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Retail bank Northern Rock is expecting greater volatility in profits with the introduction of IFRS, because of the requirements of IAS39. The company does not expect asset growth and profit targets to be affected under the new standards, however. In a trading statement, the bank said that it would provide a detailed analysis of the new standards in May when it releases its half-year results.
Burren Energy, the oil exploration and production company, is working with other industry players on a communication campaign on IFRS. Announcing a pre-tax profit of £48.5m for 2005, the company said it was involved in an initiative to ‘appraise broker research analysts of the generic impact of IFRS’ on the financial statements of exploration and production companies. The company said that the standards would have an impact on ‘the reported profits and the balance sheet’, but added that cashflow would not be affected.
Emess Plc has received court approval to convert all its preference shares into ordinary shares, which has increased the number of its ordinary shares from 227 million to 284 million. The company undertook further capital restructuring by buying back non-voting deferred shares for 1p.
Underwriter Atrium is expecting pre-tax profits for 2004 to be substantially higher than market expectations. An accounting change was cited as one of the reasons for improved performance. In a trading update the company said it was moving to annual accounting for some of its syndicates, which would see a modification to its reserving methodology. The change will allow the business to recognise profits of around £4m earlier than anticipated.
Former software company Enition has booked a £5.7m loss for the period from 6 July 2003 to 31 December 2004, and is now effectively a cash shell. Enition liquidated its trading subsidiary CDE in December 2004 to become a non-trading entity. The company’s board said that, as the business was no longer trading, annual running costs were ‘no more than £100,000’, but there was no news regarding ‘potential opportunities with other trading businesses’.
YooMedia – the UK’s biggest independent interactive media company – had to charge a £8m goodwill impairment provision to its financial statements for 2004. The company, which operates digital dating and gaming services, reported and operating loss of £24m for the year. Turnover, however, was up from £0.7m in 2003 to £21.3m.
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