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Amend accounts or PYA

Which would you do in this scenario

Didn't find your answer?

Posting anonymous as I've previously posted on this and me / my client could be identified which I'd like to avoid.

I've got a new client.

The company sold it's property to a holding company in the previous year but it wasn't included in the accounts. 

The situation is. The year end was November 2019. The sale went through on 25/11/2019 but the client received paperwork in December 2019, didn't read it and assumed the sale was December 2019. The previous accountants prepared accounts on this basis. I've seen the paperwork and it's definetely November 2019 so it should have been in last years accounts that have been filed

The property was sold for £430,000 so it's definetely material so the balance sheet last year wouldn't show a true and fair view.

I think amended accounts are needed. Would you agree or would a PYA suffice? 

Replies (6)

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By Paul Crowley
13th Jan 2021 17:00

Is it me?
the dr and dr equal each over
Unless the P&L is wrong from making a huge profit or loss, then how exactly is the BS misleading?

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Replying to Paul Crowley:
Psycho
By Wilson Philips
13th Jan 2021 17:12

The net effect on B/S and P&L may be trivial but if the accounts show that the company owned a fixed asset at say £400k then the balance sheet may well be materially mis-stated.

My view - re-state comparatives, with PYA if necessary to reflect gain/loss on disposal.

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Replying to Paul Crowley:
Hallerud at Easter
By DJKL
13th Jan 2021 17:17

Fixed asset to debtors, so liquidity misleading (it was in reality better than shown), any P & L uplift /gain omitted, and we are not told what valuation used re sale to holdco beyond £430k so have no idea.

If £430k is material, as I think it likely is, and if there are tax considerations (which we are not told), I think I would be correcting earlier year and if need be correcting CT600/disclosing transaction to HMRC in correct year , we also possibly have missed related party note to add to the mix. (And if there is say a heritable creditor we could have misstated bank loans as well)

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By johnt27
13th Jan 2021 18:56

PYA for me. If it had been discovered earlier I'd have been tempted by the re-submit argument. You may well have to unpick any CT mess as well

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Replying to johnt27:
Psycho
By Wilson Philips
13th Jan 2021 19:13

Hopefully, if there is a 75% group, there should be no CT mess to unpick.

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Replying to Wilson Philips:
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By johnt27
13th Jan 2021 19:45

Agreed, but a dangerous assumption :)

You never know they might use IFRS and have a whole load of IFRS 16 fun to deal with...

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