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Investors call for Barclays accounting probe

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9th May 2011
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A group of investors has written to the Financial Reporting Council (FRC) to investigate Barclays over claims that IFRS is distorting the reporting of its bonus liabilities.

The Daily Telegraph reports that in a letter to the Financial Reporting Review Panel (FRRP) investors outlined concerns that international GAAP allowed Barclays to delay the impact of £1.4bn of bonus payments on profits.

Shareholders argued the accounting rules are distorting the figures of all the big UK banks, affecting both reported profits and dividend payments.

The investors pointed to Barclay’s staggering of bonus liabilities over several years - reporting just the amount for a single year rather than the full liability.

While Barclays has been singled out, the bank’s accounting is in accordance with IAS 19 and consistent with other large British banks.

Iain Richards, head of corporate governance at Aviva Investors, told the Telegraph: "Section 411 does require all bonuses and payments to be disclosed, not just those normally covered by the IFRS rules. It's an issue of concern for us given that the amount is material."

The investors will take advice from the FRC and are then expected to write to the auditors of the banks for further information.

The FRRP has the power to demand companies restate their accounts - either voluntarily or by a court order.

The shareholder letter follows a report by Pensions & Investment Research Consultants (PIRC) which warned that Barclays' method of accounting for its bonuses is "deficient".

The warning points to an obscure note in its 2010 annual report where Barclays reveals that in addition to a £437m payment to the Treasury for the one-off bonus tax, it decided to spread the impact of the levy over a period of five years.

A Barclays spokesperson confirmed that it had paid the tax in full but was staggering the impact of the cost: "The Bank Payroll Tax is recognised in the accounts over the same periods as the periods over which the corresponding bonuses are recognised in the accounts."

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