Barclays’ accounting ‘distorts profits’

BARCLAYS’ METHOD of accounting for bonuses obfuscates profits, bonuses and liabilities, according to investor lobbyists Pirc.

The bank’s 2010 annual report showed that despite £437m having been paid to the Treasury in a one-off bonus tax, that amount – as well as the company’s bonuses – have been spread over a period of five years for accounting purposes, reported The Daily Telegraph.

Pirc’s research indicated that £116m of deferred tax due to be paid between 2011 and 2013 relates to around £1.4bn of bonuses to be paid out during that period. The research group noted: “Taken together there appears to be £1.4bn of bonuses awarded and the tax thereon that has not been put through the profit and loss account.”

The consultancy claimed that Barclays is not admitting liabilities for bonuses that were firm enough to have been taxed over a year ago and warned: “Leaving out such a material sum is obscuring the fact that the balance of reward between the risk-bearing shareholders and insiders is even less favourable than appears from the accounts.”

The research group is encouraging investors to vote against Barclay’s remuneration report, calling it “opaque”, with difficult-to-analyse executive pay packets that make it hard to see the balance of reward between shareholders and insiders.

Barclays is holding its AGM today and Pirc’s timing could muddy the waters.

A bank spokeswoman said that a certain portion of staff bonuses is deferred and that the tax on the windfalls is therefore deferred in the same way, adding that the 2010 accounts have been available for some time and have been thoroughly examined in the press.

Related reading

Life Belt with Computer Folders