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News October 2010 Findings of the Financial Reporting Review Panel in respect of the accounts of Sabien Technology Gro

Findings of the Financial Reporting Review Panel in respect of the accounts of Sabien Technology Group Plc for the year ended 30 June 2009

29 October 2010
FRRP PN 127

The Financial Reporting Review Panel (‘the Panel’) has had under review the report and accounts of Sabien Technology Group Plc (‘the company’) for the year ended 30 June 2009.

The Panel’s principal concern related to the company’s reclassification of convertible loan notes in its consolidated cash flow statement.

In the 2010 Preliminary Results, announced today, the directors have corrected an error reported in the 2009 consolidated cash flow statement through a restatement of the comparative figures. The principal corrections related to the presentation of cash generated from operations and cash flows from financing activities. As a consequence of these corrections, cash outflow from operating activities originally reported as £257,000 was understated by £483,000 and should, therefore, have been reported as £740,000 and net cash outflow from financing activities originally reported as £514,000 was overstated by £483,000 and should, therefore, have been reported as £31,000 in the 2009 accounts. There is no effect on the opening and closing cash position, comprehensive income, or statement of financial position as previously reported.

The Panel welcomes the corrective action taken by the directors and regards its enquiries into the company’s accounts for the year under review, initiated on 13 July 2010, as concluded.

Notes to Editors
  1. The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
  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. IAS 7 ‘Cash Flow Statements’ explains that a cash flow statement, when used in conjunction with the rest of the financial statements, provides information that enables users to evaluate the changes in net assets of an entity, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash flows in order to adapt to changing circumstances and opportunities. Cash flow information is useful in assessing the ability of the entity to generate cash and cash equivalents and enables users to develop models to assess and compare the present value of the future cash flows of different entities. It also enhances the comparability of the reporting of operating performance by different entities because it eliminates the effects of using different accounting treatments for the same transactions and events.
  5. IAS 7 requires an entity to present its cash flows from operating, investing and financing activities in a manner which is most appropriate to its business. Classification by activity provides information that allows users to assess the impact of those activities on the financial position of the entity and the amount of its cash and cash equivalents. This information may also be used to evaluate the relationships among those activities.
  6. IAS 7 states that investing and financing transactions that do not require the use of cash or cash equivalents are to be excluded from a cash flow statement. The reclassification of a financial liability as current when it is due to be settled within twelve months after the balance sheet date, as required by IAS 1 ‘Presentation of Financial Statements’, is such a non-cash transaction that is to be excluded from a cash flow statement.
  7. 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.
Document created under a former FRC operating body.

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