Hi Captain,
Thank you very much.
My understanding looking at the restatements in Note 17 of the account 31 March 2018 I see the following:
Page 83 - 31 March 2018 accounts
17.7 Other
Included in other restatements:
• Inflated income which has resulted in both operating profit and assets being overstated;
• Incorrect application of group accounting principles in the light of new factors;
• Disposition of assets without appropriate security, leading to concern regarding recoverability of
these assets;
• Incorrect classification of assets and liabilities;
• A reduction in treasury shares and dilutive instruments becoming anti-dilutive due to an operating
loss attributable to ordinary shareholders during the period; and
• Reclassification of non-current liabilities to current as a result of the impact of other restatements on debt covenants
In pages 76-77 Income statement – Restated 31 March 2017
Profit/(loss) for the period - (941)
In pages 74-75 Balance Sheet – Restated 31 March 2017
Total Assets – (7229)
Liabilities = (335) got this from liabilities – equity
Therefore total impairments to note 17.7 Other is (8495)
So does this mean that enough impairments done?
Your comments appreciated.
Best Regards,
DTD
Hi DTD,
Its a long question and and answer. If I don't do it justice here, send me your private e-mail and I can update you away from this ShareChat platform. Don't want to be accused of being a guru and all that. I'm also not sure how much of an accounting boffin you are - you sound quite clued up. But here goes...
A lot more than just impairments because of fraud is taking place on this adjustment reconciliation.
1. Eg. correction of a legitimate accounting process where a Purchase Price Adjustment is required for Mattress Firm and Poundland (17.1);
2. impairments because the Goodwill and Intangibles carrying value is more than their realizable value [this is indirectly related to the fraud - a result of the higher WACC brought on by the fraud] (17.2 & 17.3);
3. Impairments of Property Plant and Equip (17.4) - this is the fraud on the Hemisphere properties
4. Correction of POCO from consolidation to Equity treatment (17.5) - not a direct fraud. This was the Court decision, with Steinhoff only owning 50% and not having control
5. Correction of Habufa (17.6) consolidation to Equity treatment - again as far as I can tell, not a fraud but an incorrect interpretation and treatment incorrectly treating Habufa as under Steinhoff control when it was not
6. All other transactions that did not fit into the above were accounted for as other - this is mostly (but not all fraud related)
Don't get too hung on about the Non-current assets being reclassified as current assets. This is due because Steinhoff is in technical breach of its debt covenants and obligations, and the non-current liabilities is classified as current. The amounts contra each other out, so there is no material impact overall.
Always remember the accounting equation of Assets = Equity + Liabilities
With that in mind, you see that the total assets impaired is € 12 334 (from previous € 36 670 to € 22 336).
We need to get a corresponding € 12 334 adjustment to the Equity and Liabilities for the Accounting Equation to balance.
For 1H17, the impact of the above asset impairments was € 10 943 for equities (€ 16 635 to € 5 692); and € 1 391 for total liabilities.
Check: € 10 943 + € 1 391 = € 12 334
So the Balance Sheet has been mostly cleaned up if not entirely cleaned up.
All these impairments has to affect the Equity, and this is reflected on the statement of changes in equity on page 49 where see the correction of € 10 161. The difference to the total impairments/adjustments is due to the deferred tax and other tax treatments.
Best Regards
Captainfrom82
