I came across a company the other day, with net assets of one pound, and capital/reserves of one pound. This was the balance sheet position for three years in a row. Although the accounts were classed as exempt, following the balance sheet was a detailed profit and loss account. This showed the net after tax profit, and then dividend declared equal to the profit, so the end result was nil. I admit I was taken aback, because it demonstrates all too clearly that the dividend was calculated and (I assume) credited to the DLA well after the event. Is this a widespread practice?
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In my forensic work I see lots of accounts prepared by other people - my office is full of them - and I can confirm that the practice of backdating dividends to the balance sheet date is widespread. It is not usually as blatant as in the example you describe. It is usually about putting an overdrawn loan account back in credit.
It is very widespread because there are no repercussions.
In theory there are, but I've never heard of them happening.
I think it is pretty common.
In fact, I'd hazard a guess that backdating dividends is more common than them actually being declared properly.
Wonder what happened to the corporation tax accrual and perish the thought accrual for accountancy fee.
Agree with the above comments but - jeez - net assets of exactly £0 is a bit blatant. I've not seen that too often.
I see it from lazy accountants who can not be arsed to advise their clients on simple procedures and then have to concoct a fallacy to assuage their guilt. Then repeat year after year after . . .
I prepared a set of accounts this week with the net profit after tax of exactly zero to round pounds.
Complete fluke, it wasn't planned.
infact I spent 20 minutes trying to make it anything but zero but there was nothing much I could move short of accruing a £20 phone bill, so I left it.
Look weird mind.
I prepare accounts for a 150-strong multi-headed group of companies, roughly 50% of which are then audited by a Big4.
The in-house team have sent me 4 different values of the same (year-end) dividend that was passed up a 12-company chain as minor adjustments were made in the bottom company. Apparently they needed £nil reserves in the bottom co.
A different string needed a £nil balance sheet in the top co - that 7 company dividend chain has changed thrice.
Chances of the auditors saying anything? Zip. The dividend paperwork will match the accounts. Plus, why rock a £95k pa fee. (The audit fee, not mine!)