The Financial Reporting Review Panel (“the Panel”) has had under review the report and accounts of Robinson Webster (Holdings) Limited (“the company”) for the period ended 29 September 2007. The auditors’ opinion on the accounts was qualified for disagreement in relation to non-compliance with FRS 20 ‘Share-based Payment’.

The Panel concluded that the company’s failure to recognise an expense for share–based payment in the profit and loss account, in respect of a share option scheme under which shares vested during the period, was not in accordance with that standard.

The directors have accepted the Panel’s conclusions and, in the financial statements for the 52 week period ended 27 September 2008 recently filed at Companies House, have corrected the error by way of a prior period adjustment. The Panel welcomes the corrective action taken by the directors and regards its enquiries into the company’s accounts for the period under review, initiated on 14 November 2008, as concluded.

Non compliance with FRS 20 by Robinson Webster (Holdings) Limited

The company disclosed in its 2007 accounts that no provision had been made for the value of share options granted during the period in accordance with FRS 20, as the directors were of the opinion that this would give a misleading view.

The share–based payment that should have been charged in the 2007 accounts in accordance with FRS 20 was not quantified at the time the accounts were issued, but has subsequently been determined by the Directors at £1,770,000. The impact of this charge would have been to reduce consolidated profit for the financial period from £1,234,000 to a loss of £536,000. The recognition of the share-based payment charge has no effect on either cash flow for the period or net assets at 29 September 2007.

As there was no vesting period under the relevant share option scheme the whole charge under FRS 20 fell to be recognised in profit and loss for the period to 29 September 2007. The scheme, therefore, has no impact on reported financial performance for the period ended 27 September 2008.
 

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on Corporate Governance.
2. The Role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 2006 (“the Act”) including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
3. Where breaches of the Act are discovered the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company’s accounts are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 456 of the Act for an order for revision. To date no court applications have been made.
4. FRS 20 requires a company to recognise an expense when goods or services received in a share based payment transaction are consumed. If the equity instruments granted vest immediately without a specified period of service being required before the provider of services becomes entitled to the instruments, the services shall be recognised in full, with a corresponding increase in equity. If the fair value of the goods and services received cannot be estimated reliably, their value and the corresponding increase in equity are measured, indirectly, by reference to the fair value of the equity instruments granted.
5. The Chairman of the Panel is Bill Knight and the Deputy Chairmen, Ian Wright and David Lindsell. There are currently 26 other Panel members drawn from a broad spectrum of commerce and the professions. Individual cases are normally dealt with by specially constituted Groups of 5 or more members.
6. All Press enquiries and consultation responses should be directed to Carol Page tel: 020 7492 2460 or at c.page@frc-frrp.org.uk