Financial Strategy, Second Edition

CASE STUDY 11

Queens Moat Houses plc

The following text is extracted from the Notes to the Accounts for the year to 31 December 1992 of Queens Moat Houses plc.

PRIOR YEAR ADJUSTMENTS AND RECLASSIFICATIONS

Following an investigation into the affairs of the group, including a review of the group's accounting policies and the treatment of certain transactions in prior years, the current directors have concluded that the accounts for 1992 and future years would be unlikely to give a true and fair view of the group's results and financial position if such policies and treatments continued to be adopted. Accordingly, certain changes have been made which, in the opinion of the current directors, ensure that the accounts are prepared in accordance with best practice and give a fairer presentation of the group's results and financial position. In order to ensure comparability, the 1991 accounts have been restated to reflect these changes. In addition, certain profit and loss account and balance sheet items have been reclassified. Further details of the prior year adjustments and reclassifications are set out below together with a summary of their effects on the accounts as at 31 December 1991 and for the year then ended.

Prior Year Adjustments

(a) Licence Fees

Previously, licence fees receivable from hotel operations not directly managed by the group were included in income in full at the commencement of the period of the licence and the turnover and net operating costs of such operations ...