Ltd Co profit and loss to be disclosed
Discussion
2 sMoKiN bArReLs said:
Berger 3rd said:
What are you saying isn’t accurate, the figures? In which case isn’t that HMRCs job, not CH? And how many companies use an accountant? Presumably more than 5-10%? So you’re essentially saying a huge percentage of accountants are bent?
I’m just saying that in real life nearly all company results are manipulated to serve a purpose. Motivation can be to reduce profits to reduce tax, increase profits in preparation for sale or to fool the market. Or…just plain ineptitude.
basherX said:
I’m slightly stunned at this thread. Or maybe, knowing PH, I shouldn’t be.
I read Law at university before going in Accountancy and at one of those junctures it was drummed into us that “the price of limited liability status is disclosure”.
I guess though the question being asked is disclosure of what?I read Law at university before going in Accountancy and at one of those junctures it was drummed into us that “the price of limited liability status is disclosure”.
In my simplistic thought
Currently the disclosure is limited to
“what the company has”.
This change means also available
“what the company did”
I get that for some smaller/simplistic co’’s the latter is very transparent in showing potentially commercially sensitive things.
Coupled with the ability to extract & analyse data these days, it will be rapidly turned into info that folks try & use for good & bad.
Going forwards I guess less folks might form a company.
Berger 3rd said:
But accurate is highly subjective, all companies will try and mitigate their tax bill as much as possible, some will do it better than others depending on their knowledge or that if their accountants, that doesn’t make their accounts ‘inaccurate’ unless we’re talking about actual tax evasion, in which case that would surely fall under the remit of HMRC. How are companies house supposed to investigate the ‘accuracy’ of figures, whatever is actually meant by accuracy.
There is no requirement for accounts to be "accurate". The nearest definition that is used is "true and fair".When preparing accounts, a number of assumptions and conventions are used to arrive at the final figures. There is a degree of flexibility in how these are utilised although one of the main ones is "consistency" i.e. whatever conventions are adopted, you stick with them.
They are covered by GAAP (Generally Accepted Accounting Practices) - something which Donald Trump Jnr seems blissfully unaware of when interviewed - although he was very funny about it.
I don't think my roofer will be too worried. He will always be reporting £0.00 pre-tax profit.
Very thorough with his roofing work (always finds additional defects in urgent need of repair), but Companies House reveals that he is hopeless at making money. However, he usually turns up to collect payments in his new Mercedes S Class.
He always greets me with the same catchphrase, "If you pay me cash, I can knock off the VAT".
Intriguing how cash somehow eliminates all VAT charges !
basherX said:
And if you think that’s unrealistic: when I was in practice we had a client with a business turning over multiples of hundreds of millions of pounds, very much now in the public eye, who didn’t want to incorporate because he didn’t want the public exposure. So he was one of, if not the, largest UK sole trader and bore the liabilities himself.
I don't suppose you used to work at a small practice in Burnham did you?Berger 3rd said:
But accurate is highly subjective, all companies will try and mitigate their tax bill as much as possible, some will do it better than others depending on their knowledge or that if their accountants, that doesn’t make their accounts ‘inaccurate’ unless we’re talking about actual tax evasion, in which case that would surely fall under the remit of HMRC. How are companies house supposed to investigate the ‘accuracy’ of figures, whatever is actually meant by accuracy.
True.I once reconstructed an externally audited set of accounts which showed a £50,000 profit. Based on the same data I came up with a £600,000 loss.
2 sMoKiN bArReLs said:
True.
I once reconstructed an externally audited set of accounts which showed a £50,000 profit. Based on the same data I came up with a £600,000 loss.
I presume you adhered to GAAP, the various FRSs and tax law?I once reconstructed an externally audited set of accounts which showed a £50,000 profit. Based on the same data I came up with a £600,000 loss.
If you did, then well done.
What is interesting is that large scale corporate fraud tends to be based on INFLATING profits - to obtain better stock market valuations.
For smaller businesses, fraud tends to favour REDUCING profits to avoid and/or evade tax.
AndyC_123 said:
I dont really want my customers seeing the profitability of my companies.
I know you can get a rough idea from the balance sheet, but it's not there in black and white for people to see who have no accountancy skills.
The current level of disclosure for smaller companies (turnovers under £6.5 million, less than 50 staff etc) that even the most genius of accountants or financial interpreters are unable to see ANYTHING of use about the annual performance of such companies from what is filed at Companies House.I know you can get a rough idea from the balance sheet, but it's not there in black and white for people to see who have no accountancy skills.
All you get to see is a very stripped down balance sheet which shows the accumulated reserves as at the balance sheet date.
If you look at the previous year's balance sheet and deduct the latest reserves from the previous reserves all you can deduce is how much the reserves have gone up or down.
What you cannot see is -
how much the annual profit was
how much the Corporation Tax charge was
how much was extracted in the form of dividends
whether there were any revaluations credited to the reserves
In other words, current disclosure rules are pretty much useless when it comes to assessing the company's performance.
The only useful information is being able to see if the company is solvent or not - and even then that may not be truly obvious.
gf5mez said:
basherX said:
And if you think that’s unrealistic: when I was in practice we had a client with a business turning over multiples of hundreds of millions of pounds, very much now in the public eye, who didn’t want to incorporate because he didn’t want the public exposure. So he was one of, if not the, largest UK sole trader and bore the liabilities himself.
I don't suppose you used to work at a small practice in Burnham did you?Eric Mc said:
The current level of disclosure for smaller companies (turnovers under £6.5 million, less than 50 staff etc) that even the most genius of accountants or financial interpreters are unable to see ANYTHING of use about the annual performance of such companies from what is filed at Companies House.
All you get to see is a very stripped down balance sheet which shows the accumulated reserves as at the balance sheet date.
If you look at the previous year's balance sheet and deduct the latest reserves from the previous reserves all you can deduce is how much the reserves have gone up or down.
What you cannot see is -
how much the annual profit was
how much the Corporation Tax charge was
how much was extracted in the form of dividends
whether there were any revaluations credited to the reserves
In other words, current disclosure rules are pretty much useless when it comes to assessing the company's performance.
The only useful information is being able to see if the company is solvent or not - and even then that may not be truly obvious.
Agreed. When I have work (eg building work) done at home, or I’m making a large personal purchase (or indeed when my wife was swapping jobs) I like to get the measure of my counterparty. To my enduring shame, I’ve been burnt in the past and not keen for a repeat. But most small company accounts aren’t worth the filing fee at all. All you get to see is a very stripped down balance sheet which shows the accumulated reserves as at the balance sheet date.
If you look at the previous year's balance sheet and deduct the latest reserves from the previous reserves all you can deduce is how much the reserves have gone up or down.
What you cannot see is -
how much the annual profit was
how much the Corporation Tax charge was
how much was extracted in the form of dividends
whether there were any revaluations credited to the reserves
In other words, current disclosure rules are pretty much useless when it comes to assessing the company's performance.
The only useful information is being able to see if the company is solvent or not - and even then that may not be truly obvious.
2 sMoKiN bArReLs said:
True.
I once reconstructed an externally audited set of accounts which showed a £50,000 profit. Based on the same data I came up with a £600,000 loss.
I once reconstructed an externally audited set of accounts which showed a £50,000 profit. Based on the same data I came up with a £600,000 loss.
How do you de-construct a set of Financial,Statements, re-construct them, and come up with a completely different Profi/Loss figure?
or did you have access to the TB, the various accruals and prepayments, and all the management estimates?
The point I'm getting at is that the underlying figures must have been wrong in order for the FS to be wrong.
Eric Mc said:
The current level of disclosure for smaller companies (turnovers under £6.5 million, less than 50 staff etc) that even the most genius of accountants or financial interpreters are unable to see ANYTHING of use about the annual performance of such companies from what is filed at Companies House.
All you get to see is a very stripped down balance sheet which shows the accumulated reserves as at the balance sheet date.
If you look at the previous year's balance sheet and deduct the latest reserves from the previous reserves all you can deduce is how much the reserves have gone up or down.
What you cannot see is -
how much the annual profit was
how much the Corporation Tax charge was
how much was extracted in the form of dividends
whether there were any revaluations credited to the reserves
In other words, current disclosure rules are pretty much useless when it comes to assessing the company's performance.
The only useful information is being able to see if the company is solvent or not - and even then that may not be truly obvious.
Disagree.All you get to see is a very stripped down balance sheet which shows the accumulated reserves as at the balance sheet date.
If you look at the previous year's balance sheet and deduct the latest reserves from the previous reserves all you can deduce is how much the reserves have gone up or down.
What you cannot see is -
how much the annual profit was
how much the Corporation Tax charge was
how much was extracted in the form of dividends
whether there were any revaluations credited to the reserves
In other words, current disclosure rules are pretty much useless when it comes to assessing the company's performance.
The only useful information is being able to see if the company is solvent or not - and even then that may not be truly obvious.
Whilst you might not be able to see any fine detail, if the balance sheet jumps from £1 million to £2 million, its extremely likely the company is generating plenty of profit.
AndyC_123 said:
Disagree.
Whilst you might not be able to see any fine detail, if the balance sheet jumps from £1 million to £2 million, its extremely likely the company is generating plenty of profit.
Extremely likely? No, not necessarily so. Both sides of the balance sheet have to increase. In your example numbers, the company may have borrowed £1m to buy stock, both sides of the BS has increased, however, it doesn't give any indication of increased, or any, profitability. Given that loan would need servicing it may well indicate a decrease in profitability.Whilst you might not be able to see any fine detail, if the balance sheet jumps from £1 million to £2 million, its extremely likely the company is generating plenty of profit.
AndyC_123 said:
Disagree.
Whilst you might not be able to see any fine detail, if the balance sheet jumps from £1 million to £2 million, its extremely likely the company is generating plenty of profit.
Not necessarily. They could have revalued all their assets (I appreciate there should be a reserve element to balance the top half), not paid the normal dividend to make the company look better if they're looking to do a share issue, hidden a bank loan in normal creditors for which they used the cash to pay off trade creditors, made use of the current R&D scam, etc. etc.Whilst you might not be able to see any fine detail, if the balance sheet jumps from £1 million to £2 million, its extremely likely the company is generating plenty of profit.
Lots of ways to present the accounts, whether they're all true and fair can be debated. But if they're not audited accounts whose going to check? And even if they are audited that's no guarantee. Just read the accounting press to see how often the big 5 firms get fines for bad audit work.
Gassing Station | Business | Top of Page | What's New | My Stuff