THE Financial Reporting Council (FRC) has ended its investigation into online business services exchange outfit, the blur Group, after questions were raised about its revenue recognition on a number of historical contracts.
The audit and accounting watchdog’s conduct committee announced its conclusion having “discussed certain issues with the company following its review of the annual report and accounts”.
Core to the probe was whether the company was generally acting as a principal rather than an agent in relation to the multitude of outsourcing services it provided as set out in IAS 18.
blur has now made a prior year restatement reducing its reported revenues for the six months to 30 June 2014 by $3.4m (£2.2m) and $1.2m for the year to 31 December 2013 and costs by $2.8m.
Having deliberated over the issues, the committee was satisfied that the evidence produced by blur Group’s directors, supported their judgement that they are generally acting as principal rather than agent.
The watchdog’s committee also welcomed actions taken by the AIM-listed company’s directors as reported in its interim accounts for the six months to 30 June 2015.
The directors also clarified the company’s revenue recognition accounting policy and have vowed to improve disclosures regarding supplier risks and uncertainties in its business model.
It also acknowledged that the Statement in the Strategic Report in the report and accounts for the year ended 31 December 2014, the company had achieved five consecutive years of revenue growth but should have explained that revenue from successful projects had shrunk by 15% in that year while listing fees from terminated projects had increased fivefold.
The committee noted “that certain similar changes were made in the company’s annual report and accounts for the year ended 31 December 2014 published in June 2015” and had now concluded its enquiries.
The FRC’s conclusion marks the end of a troubled year for the firm. In May, blur Group’s CFO Stephen Harvey departed after just eight months in the role. His exit marked a triple whammy for the Exeter-based business, having lost its third finance chief in two years.
In its statement to the stock market, blur Group said the former Microsoft UK man “has stepped down from his non-board position as group chief financial officer with immediate effect ahead of a personal bankruptcy hearing due to be held on 18 May 2015. This is a personal matter wholly unrelated to the group”.
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