DESC Designcapital

 

TIDMDESC 
 
RNS Number : 6632O 
Financial Reporting Review Panel 
01 July 2010 
 

                  Aldwych House, 71-91 Aldwych, London WC2B 4HN 
               Telephone: 020 7492 2300       Fax:  020 7492 2479 
                              www.frc.org.uk/frrp 
 
 
FRRP PN 125 
    1 July 2010 
                                  PRESS NOTICE 
 
FINDINGS OF THE 
 FINANCIAL REPORTING REVIEW PANEL IN RESPECT OF THE ACCOUNTS 
            OF DESIGNCAPITAL PLC FOR THE YEAR ENDED 31 DECEMBER 2008 
The Financial Reporting Review Panel ("the Panel") has had under review the 
report and accounts of designcapital plc ("the company") for the year ended 31 
December 2008. 
 
The Panel's principal concern related to the company's treatment of foreign 
exchange differences arising on the retranslation of foreign operations in its 
consolidated cash flow statement. 
 
In the Final results for the year to 31 December 2009, released on 30 June, the 
directors have corrected errors reported in the 2008 consolidated cash flow 
statement through a restatement of the comparative figures. The principal 
correction related to the presentation of the effect of changes in exchange 
rates. As a consequence of this correction and other more minor corrections, 
cash outflow from operating activities originally reported as GBP19,712 was 
understated by GBP805,126 and should, therefore, have been reported as 
GBP824,838 in the 2008 accounts. There is no effect on the opening and closing 
cash position as previously reported. 
 
The company has also taken the opportunity to correct its accounting treatment 
of a subsidiary acquired during the year that had a different reporting date to 
the parent company. The effect of these adjustments is that cash outflow from 
operating activities has been revised to GBP719,212 and cash and cash 
equivalents at the end of the year revised to GBP1,056,514. 
 
The Panel welcomes the corrective action taken by the directors and regards its 
enquiries into the company's accounts for the year under review, initiated on 5 
November 2009, as concluded. 
 
                                                                   Continued ... 
Notes to Editors 
 
1.   The Financial Reporting Council is the UK's independent regulator 
responsible for promoting high quality corporate governance and reporting to 
foster investment. 
2.   The Role of the Panel is to examine the annual accounts of public and large 
private companies to see whether they comply with the requirements of the 
Companies Act 2006 ("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. 
3.   Where breaches of the Act are discovered the Panel 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 are defective in a 
material respect the Panel will, wherever possible, try to secure their revision 
by voluntary means, but if this approach fails the Panel 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. 
4.   IAS 7 'Cash Flow Statements' states that unrealised gains and losses 
arising from changes in foreign exchange rates are not cash flows. However, the 
effect of exchange rate changes on cash and cash equivalents held or due in a 
foreign currency is reported in the cash flow statement in order to reconcile 
cash and cash equivalents at the beginning and the end of the period.  This 
amount is presented separately from cash flows from operating, investing and 
financing activities and includes the differences, if any, had those cash flows 
been reported at the end of period exchange rates. 
5.   The method of translation for foreign operations under IAS 21, 'The Effects 
of Changes in Foreign Exchange Rates', requires monetary and non-monetary assets 
and liabilities to be translated at the closing rate and income and expense 
items to be translated at the rate ruling at the date of the transaction or an 
average rate that approximates to the actual exchange rates, for example, an 
average rate for the period. All exchange differences are taken to a separate 
component of equity, until disposal of the foreign operation when they are 
recycled to the income statement. 
6.   All exchange differences relating to the retranslation of a foreign 
operation's opening net assets to the closing rate will have been taken directly 
to reserves. As such exchange differences have no cash flow effect; they will 
not be included in the consolidated cash flow statement. However, where 
the 
 
 
                                                                   Continued ... 
 
 
 
 opening net assets include foreign currency cash and cash 
equivalents, then, to that extent, the exchange difference arising on their 
retranslation at the closing rate for the current period will have been 
reflected in the closing balances. Such translation differences should be 
reported in the cash flow statement to determine the total movement in cash and 
cash equivalents in the period. 
7.   IAS 27, 'Consolidated and Separate Financial Statements', states that the 
financial statements of the parent and its subsidiaries used in the preparation 
of consolidated financial statements should be prepared as of the same reporting 
date.  When the reporting dates of a parent and its subsidiary are different, 
the subsidiary should prepare, for consolidation purposes, additional financial 
statements as of the same date as the financial statements of the parent unless 
it is impracticable to do so. 
8.   Where, in accordance with IAS 27, the financial statements of a subsidiary 
used in the preparation of consolidated financial statements are prepared as of 
a reporting date different from that of a parent, adjustments should be made for 
the effects of significant transactions or events that occur between that date 
and the date of the parent's financial statements. 
9.   The Chairman of the Panel is Bill Knight and the Deputy Chairmen, Ian 
Wright and David Lindsell. There are currently 26 other Panel members drawn from 
a broad spectrum of commerce and the professions. Individual cases are normally 
dealt with by specially constituted Groups of 5 or more members. 
10. All Press enquiries should be directed to: Carol Page tel: 020 7492 2460 or 
at c.page@frc-frrp.org.uk 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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