6.7 million profit

[Royal Rother]

Hissy fit? What an odd take on it.

[The 17 Bus]

Surely accountants can only work on the figures that they are given?

Harsh to think that accountants are the fiddlers,

[Royal Lady]

Accountants are perfectly capable of making it look like you have earned less money than you have etc, they are adept at showing you the best way to make use of tax advantages etc. They are not fiddling, but nor are a lot of sets of business accounts the "true picture". HTH.

[westendgirl]

They are not fiddling, but nor are a lot of sets of business accounts the "true picture". HTH.

This is an interesting assertion - is this based on experience or the 'everyone knows' school of learning.

It is true I am an accountant (so hissy fit in place) but not for the sort of business that RFC is - I deal with the self-employed and I know that even among those who use accountants the real awareness of what their accounts mean is very low (which tbh does keep me in work) and the ignorance of what the accounting standards allow and don't allow is immense and although I don't deal with any limited companies my CPE does at least keep me aware of the more restrictive standards allpied to PLCs.

[Royal Lady]

They are not fiddling, but nor are a lot of sets of business accounts the "true picture". HTH.

This is an interesting assertion - is this based on experience or the 'everyone knows' school of learning.

It is true I am an accountant (so hissy fit in place) but not for the sort of business that RFC is - I deal with the self-employed and I know that even among those who use accountants the real awareness of what their accounts mean is very low (which tbh does keep me in work) and the ignorance of what the accounting standards allow and don't allow is immense and although I don't deal with any limited companies my CPE does at least keep me aware of the more restrictive standards allpied to PLCs.

Experience. HTH.

[West Stand Man]

They are not fiddling, but nor are a lot of sets of business accounts the "true picture". HTH.

I have to disagree.Business accounts are, generally, a true picture. The issue with them is that the picture is from a selected, and legally acceptable, perspective. You can manipulate the presentation of some elements of the figures but you must maintain consistency in that presentation if you wish to stay inside the law.

Picasso's representation of life is a true picture, it is just from the rather odd cubist perspective that he chose. Once you are practised in observing his perspective it becomes much clearer - and so it is with business accounts.

[Royal Rother]

I just typed and lost an excellent post...

Suffice to say there really isn't anywhere that money can be lost / fiddled away in RFC's accounts. There are no debatable provisions that cloud the numbers, no related party transactions that could be viewed with any vague suspicion, just factual reporting of the trading of the company from what I can see.

If anything unusual happened it would have to be declared and believe me, auditors take their responsibilities very very seriously and simply do not turn blind eyes to stuff any more.

[The 17 Bus]

The only way RFc can fix the accounts is to take adavntage or profits and losses carried over, or am i being naive, and even then the money is still the same which ever way you look at it.

Losing money inbvolves someone else gaining it and it ending in their accounts.

[Ian Royal]

Rother are you an accountant by trade as well as westendgirl?

[Royal Rother]

I am.

[Elm Park]

Losing money inbvolves someone else gaining it and it ending in their accounts.

Not true, at least not where accounts are concerned. Provisions, for example, are allowed (such as for invoices not yet received which relate to the period the accounts are prepared for), this results in reducing the profit, so it is possible to 'lose' money without someone else gaining it. However, this is now strictly regulated.

In the past it was possible to use provisions to 'hide' money away on the balance sheet and thereby manipulate the amount of profit shown by a company. In a poor year those provisions could then be released to show a higher profit. Thereby smoothing a companies results over a number of years. Hence, if a director asked how much profit was being made, the reply would be "how much would you like".

[westendgirl]

Losing money inbvolves someone else gaining it and it ending in their accounts.

Not true, at least not where accounts are concerned. Provisions, for example, are allowed (such as for invoices not yet received which relate to the period the accounts are prepared for), this results in reducing the profit, so it is possible to 'lose' money without someone else gaining it. However, this is now strictly regulated.

In the past it was possible to use provisions to 'hide' money away on the balance sheet and thereby manipulate the amount of profit shown by a company. In a poor year those provisions could then be released to show a higher profit. Thereby smoothing a companies results over a number of years. Hence, if a director asked how much profit was being made, the reply would be "how much would you like".

But this does not contradict the bus as the gaining is a time issue - you are not disposing of anything in the long term so the total profit/loss over say a 10 year period is the same. However I would also say that your 'in the past' is possibly the most relevant and accounting standards are more restrictive now than they used to be.

In my experience unless you are in a volatile industry, changing your profits by the use of provisions is a short-term one-off procedure that is frequently regretted as it has an equal and opposite effect on the following year.

[Elm Park]

Losing money inbvolves someone else gaining it and it ending in their accounts.

Not true, at least not where accounts are concerned. Provisions, for example, are allowed (such as for invoices not yet received which relate to the period the accounts are prepared for), this results in reducing the profit, so it is possible to 'lose' money without someone else gaining it. However, this is now strictly regulated.

In the past it was possible to use provisions to 'hide' money away on the balance sheet and thereby manipulate the amount of profit shown by a company. In a poor year those provisions could then be released to show a higher profit. Thereby smoothing a companies results over a number of years. Hence, if a director asked how much profit was being made, the reply would be "how much would you like".

But this does not contradict the bus as the gaining is a time issue - you are not disposing of anything in the long term so the total profit/loss over say a 10 year period is the same. However I would also say that your 'in the past' is possibly the most relevant and accounting standards are more restrictive now than they used to be.

In my experience unless you are in a volatile industry, changing your profits by the use of provisions is a short-term one-off procedure that is frequently regretted as it has an equal and opposite effect on the following year.

But he said it inbvolves someone else gaining it, which is different.

You are right it can have an effect the following year, but, then, accounts could be filed up to 13 months after the year end, which means that a company would already have a reasonable idea of the following years profits (or losses). Also, a lot would depend on what the Directors are trying to achieve, especially if it is a private company or with very few shareholders. Having provisions stashed away, that could be realeased to profit, if a Company is being sold could be beneficial to the sellers. There might be other things going on such as the maturity of share options in which the share price is important which, partly, is influanced by the profits made.

[Royal Rother]

I try not to get involved in tax at all, but IIRC, if provisions are to be treated as allowable for tax purposes they must be specific (not general in way) so there's not much value in creating a load of old hogwash provisions and stashing them away for future release when the time is considered appropriate, (as I acknowledge DID used to happen in previous decades).

I'm sure these things DO still happen somewhere, with accountants who are not fully mindful of the rules governing their profession, but really, with respect, I think you are living in the past somewhat. These days you have to be very very careful about manipulating profits for any of the purposes you suggest.

[The 17 Bus]

I was thinking of two ways of "losing money", one can be to spend expected profits on stock or machinery, bringing forward purchases from the following year.

ANd the way the banks used to set aside provisions for possible losses, which were always too much, and were able to be returned in future years. Was always helpful to follow the shares s they usually fell on the announcement of the possible losses, and then went back up as the losses were declared to be less.

Hope that clears my thoughts up.

[Elm Park]

I try not to get involved in tax at all, but IIRC, if provisions are to be treated as allowable for tax purposes they must be specific (not general in way) so there's not much value in creating a load of old hogwash provisions and stashing them away for future release when the time is considered appropriate, (as I acknowledge DID used to happen in previous decades).

I'm sure these things DO still happen somewhere, with accountants who are not fully mindful of the rules governing their profession, but really, with respect, I think you are living in the past somewhat. These days you have to be very very careful about manipulating profits for any of the purposes you suggest.

There are certainly no tax benefits other than for specific provisions. As I said, most of my post was what happened before Accounting Standards were changed to stop such practicies.

As for things still happening - ENRON.

[Royal Rother]

8 years ago and I don't think it was UK auditors who were culpable was it?

The fraud was conceived by the internal accountants / management at ENRON - it was just crap auditing that meant it didn't get picked up - I think....

[Elm Park]

8 years ago and I don't think it was UK auditors who were culpable was it?

The fraud was conceived by the internal accountants / management at ENRON - it was just crap auditing that meant it didn't get picked up - I think....

Arthur Andersen were involved and yes it was fraud but it was still a Company using very dodgy accounting, in this particular case, IIRC, to bring forward future revenues to increase current profits.

[swansea jack]

But he said it inbvolves someone else gaining it, which is different.

You are right it can have an effect the following year, but, then, accounts could be filed up to 13 months after the year end, which means that a company would already have a reasonable idea of the following years profits (or losses). Also, a lot would depend on what the Directors are trying to achieve, especially if it is a private company or with very few shareholders. Having provisions stashed away, that could be realeased to profit, if a Company is being sold could be beneficial to the sellers. There might be other things going on such as the maturity of share options in which the share price is important which, partly, is influanced by the profits made.

Not at all. They are one of the first things that would be identified by any half decent accountant during the due dilligence process. These would be unlikely to be there anyway as all material provisions should be picked up in the statutory audit.

[Seal]

So in summary, after 15 odd pages:-

- No one really knows where our profit goes
- I'm glad I'm not an accountant