Review by the Financial Reporting Review Panel of the annual report and accounts of Pendragon PLC for the year ended 31 December 2011
07 August 2012
The Financial Reporting Review Panel (‘the Panel’) had under review the annual report and accounts of Pendragon PLC (‘the company’) for the year ended 31 December 2011.
The Panel’s principal concern related to the company’s presentation of cash flows from its contract hire vehicle operations.
In the 2012 Interim Results, announced today, the directors have corrected an error reported in the 2011 consolidated cash flow statement through a restatement of the comparative figures. The correction represented a reclassification of net cash outflows of £31.3 million, related to the company’s contract hire operations, which were reported in the 2011 consolidated cash flow statement within investing activities, to operating activities. There is no impact on the net cash flow, the opening and closing cash position, the income statement or the statement of financial position as previously reported.
As a result of the above correction, cash inflow from operating activities originally reported as £83.9 million was overstated by £31.3 million and should, therefore, have been reported as £52.6 million and net cash outflow from investing activities originally reported as £55.1 million was overstated by £31.3 million and should, therefore, have been reported as £23.8 million in the 2011 accounts.
We welcome the corrective action taken by the directors and regard our enquiries into this particular matter in the company’s annual report and accounts for the year under review, initiated on 19 March 2012, as concluded.
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- On 25 June 2012, the FRC’s Reform Programme received parliamentary approval, following which the statutory responsibility and powers relating to the review of reports and accounts was given to the Conduct Committee of the FRC with effect from 2 July 2012. Prior to this date this role was performed by the Financial Reporting Review Panel (‘the Panel’).
- The Conduct Committee is a body authorised under the Companies Act 2006 (‘the Act’) to review and investigate the annual accounts and directors’ reports of public and large private companies to see whether they comply with the requirements of 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.
- Where breaches of the Act are discovered the Conduct Committee 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 or directors’ report are defective in a material respect the Conduct Committee will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Conduct Committee 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.
- Paragraph 14 of IAS 7, 'Statement of Cash Flows', states that cash payments to acquire assets held for rental to others and subsequently held for sale, as described in paragraph 68A of IAS 16 'Property, Plant and Equipment', are cash flows from operating activities.
- The Conduct Committee maintains a Financial Reporting Review Panel (FRRP). The Chairman is Richard Fleck and the Deputy Chair is Joanna Osborne. There are currently 32 other members drawn from a broad spectrum of commerce and the professions. Individual cases may be dealt with by a specially constituted Review Group of the FRRP.