UK "Making the Financial Statements look better" UK Law

[AnAspiringAccountant]

To make the financial statements of a company look better- when does this cross the line into Practices that run the risk of erroneous accounting at best?

Interesting q in this day and age IMO- and the company is run by a private individual so no loss potentially but...

https://twitter.com/i/web/status/1324365326914625536

In particular, note the following sections:

0:29-0:34

"We, we do that, because to make er the financial statement look better"!

Then.

01:04-01:08

"So, the way I do it just make the financial statement stronger".

Interested to know, where is the line between acceptable improvement of figures and accounting that is erroneous at best! His English is not the best, worth watching the clip certainly.

You could write a book on Financial practices in the 2nd Tier of English football in recent years tbh...

 

[Fidget]

To be fair, he's just being rather open about what most organisations are doing (EFL's rules asides), in structuring operations in order to present healthy financial statements to stakeholders. There's nothing wrong with doing that (in fact, I think there'd be something wrong if an organsiation wasn't doing that) so long as relevant accounting standards and any applicable laws are being correctly applied, and of course, is it ethical to do whatever it is even if it's allowed under accounting standards/law.

The fine line is crossing into the realms of creative accounting to present financial statements in the way you want them, outright deceit and a smattering of the aforementioned ethics.

In this case, the accounting treatment of the transaction is correct, but the bone of contention was the date that the sale agreement became irrevocable - which is more a point of law. As it turns out, that date was after the year end, so the sale should not have been accounted for in the 2017/18 accounts.

You've probably seen this, but just in case you haven't - it's a link to the proceedings of the charges made against SW by EFL. It puts a lot more context to what actually happened. The gist of it is that the charge that the sale was booked in the wrong accounting period was upheld, but the charge that sale date had been deliberately backdated was dismissed.

https://www.efl.com/siteassets/image/201920/1920-judgements/efl-v-sheffield-wednesday-fc---decision.pdf

On the point of a book about football finances... I won such a thing in a book giveaway a few months back: Kieran Maguire - The price of football. Put my name in the hat for a random draw, and that's what I got. If you want it, just ping me a message with an address to send it to and I'll stick in the post.

 

[AnAspiringAccountant]

Hi @Fidget

Hope you are well.

Wrong accounting period, but deliberate backdating dismissed is absolutely what happened. I actually got Kieran Maguire's first edition when it came out and will be looking at getting the 2nd one too. Some of it was incredible- Shaun Harvey seemed to be actively encouraging them to do it after July had ended- his bit referring to "The Club's Challenge", "We are in your hands" etc- can't copy and paste so easily but I'm sure it's findable in the reports.

Small update- The Accounts for 2018/19 are now out- as expected rolled forward, though not at CH yet and surely they should resubmit the 2017/18 ones too at CH.

The one I would look at is whether the Structure can see it adjusted out on consolidation- I'll try to explain.

Based on CH entries, it shows that SWFC Holdings as of the 2019 Confirmation Statement is/was the controlling party and then it simply said Chansiri in 2020 one. However when the Accounts actually arose on the website it was:

Sheffield Wednesday FC-SWFC Holdings-Sheffield 2 Limited-Chansiri.

My question is if there was a difference between the two there, how do we know that Sheffield 3 Limited isn't part of SWFC Holdings or Sheffield 2 Limited? Until the Accounts for Sheffield 2 Limited, Sheffield 3 Limited, Sheffield Wedneday Limited are all out at CH and maybe for that matter Sheffield 5 Limited which was the controlling company of Sheffield 3 Limited, we can't know for sure IMO. Those Written Reasons did suggest that sale and leaseback between Subsidiaries would be adjusted out for P&S Purposes.