Having spoken to several accountancy experts over the weekend about the recently released accounts for BCFC PLC, the consensus of opinions received has been that these accounts are problematic.

The issue stems from the auditors’ report into the accounts. When a company files its accounts they are required to have an independent auditor check them to ensure that they have been done correctly. The auditor then issues a report which has one of four outcomes. These are: An Unqualified Opinion – which is where everything is satisfactory and the auditor has no concerns; a Qualified Opinion – which is where the auditor has to make a note of things that aren’t right but the accounts can be passed; an Adverse Opinion – which is where the auditor has to say that the accounts are wrong and need to be re-done; and a Disclaimer of Opinion whereby the auditor feels that they cannot make an opinion on the accounts. There is a better explanation of the above here on wikipedia.

The BCFC PLC accounts have a disclaimer of opinion from the auditors. The auditors make a statement to the effect that they do not believe that they were given adequate information to form a proper opinion of the accounts. According to the people I have spoken to this is a rare situation and not one that is good; it effectively states that the auditors are not happy to put their name to these accounts and the implications of that are worrying.

The basis for this disclaimer of opinion is twofold. Firstly they state that

During the audit process an individual director made comments in writing about certain transactions reflected in the financial statements that indicated concern as to the integrity of these transactions and their recording and / or disclosure in the financial statements. We have not been provided with sufficient and appropriate evidence that the board of directors have formally considered, and resolved as necessary the issues related to these comments or that these comments have been withdrawn by the individual director.

They go on to state

During the audit process we identified that significant payments that might have been related to the group were not disclosed to us in a timely fashion and we were only able to obtain important audit evidence in respect of these payments on the basis that we accepted it “redacted” and that it was not available for discussion with the Board as a whole. These payments have now been agreed to be recorded in the accounts of the parent company.

Secondly, they state

During our evaluation of the Group’s ability to continue as a going concern we have considered the evidence available to us to support the directors view that the cashflow forecasts can be achieved, that required funds can be obtained from existing or new funding sources and have also considered the group’s ability to rebase its costs as necessary in a timely fashion. Our conclusion from our evaluation is that we do not have sufficient appropriate audit evidence to conclude whether the directors’ use of the going concern assumption is appropriate in the circumstances.

In the director’s report there is a statement regarding the net income of sponsorship of kit. It states that

effective of the 2011/12 season, the rights to the net income from the sponsorship of kit was transferred to a wholly owned subsidiary of the parent company named Birmingham (Hong Kong) Ltd.

It goes on to state that

This transfer was made on the basis of an informal and unwritten agreement between the directors of BCFC and BIHL (“common directors”) to enable the HK-based company to maximise the potential of marketing the club within the Far East market.

It then goes on to state that

…it is appropriate that the net income generated from the sponsorship contract is recorded within the financial statements of BHK and that no income (either from the sponsorship or on a transfer of rights) is recorded with the financial statements of BCFC

It is worth noting that a search I have made online of both Companies House here in the UK and the Companies Registry in Hong Kong has failed to turn up a company by the name of “Birmingham (Hong Kong) Ltd”.

That part of the Director’s report finishes with

This issue alone has caused significant delay in publishing the accounts with the auditors having to seek appropriate clarifications from those concerned.

In my opinion this means that the overdue accounts of Birmingham International Holdings for the same period become ever more relevant as they will help to clarify some of the uncertainties raised by this set.

I’ve also had confirmation via a couple of sources that the embargo against new registrations that is currently in force against the club is far from being lifted; it is my understanding that the league is insisting on the accounts from Birmingham International Holdings before any further decision is made.

Nobody from Birmingham International Holdings has yet returned any phone calls or made any comment as to when we can expect those accounts to be expedited.

Once again, due to the nature of this post I have turned comments off. I understand that people do want to talk about it and I would urge those that do to make usage of the many internet messageboards, forums and forms of social media regarding Blues to do so.

Tags: Accounts, BIH, Carson Yeung