Watchdog looks at complaints over Wace accounting policy

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The Independent Online
The City's accounts watchdog, the Financial Reporting Review Panel, is examining complaints over accounting policies at Wace, the specialist printing and imaging group, that may have boosted the level of profits declared in the company's latest annual report.

It comes just a month after Wace, a former darling of the stock market, issued a profits warning that sent its shares into virtual free-fall, wiping almost pounds 60m off the company's stock market value.

Wace's annual report, signed off three months ago by auditors Arthur Andersen, shows the company made pounds 20.5m pre-tax last year, down from pounds 23.1m as restated for 1994. However, the panel is understood to be looking into the way a series of acquisitions and disposals made during the period were treated in the accounts. There is no suggestion of any impropriety.

The biggest of Wace's deals last year was Ferry Pickering, the packaging and folded cartons group bought for pounds 26.4m in December. Documents sent to the panel highlight compensation payments made to Ferry Pickering's executive directors that appear to overstate Wace's profits in 1995 by pounds 579,000. These payments, pounds 54,000 higher than set out in an earlier offer document for Ferry Pickering sent to Wace's shareholders, were treated as fair value adjustments in Wace's accounts. Under UK accounting standards, as defined in FRS7 which Wace says it has adopted, these should be treated as post-acquisition costs and taken as a charge against profits rather than through the balance sheet.

Among other items drawn to the panel's attention is the disposal of Wace's German and Italian imaging businesses, Beckmann and Colorlux.

Wace yesterday defended its accounting policies. "We've got nothing to hide," said finance director Steve Puckett. "Our accounts have been properly prepared and comply with all accounting standards, including FRS7." He added that Wace had heard nothing from the panel about its accounting methods.