Insurance outsourcer would have overstated 2014 PSD profit by £312m under old accounting methods
Quindell overstated the 2013 pre-tax profits of its professional services division (PSD) by £144.9m, the company has revealed in accounts published today.
The insurance outsourcer also revealed that under its old accounting policies, it would have overstated the division’s 2014 pre-tax profit by £312.3m.
Quindell has sold the PSD to Australian law firm Slater and Gordon and counts it as a discontinued activity in its results.
The company has revised its accounting policies after a review by accounting firm PwC found that certain accounting practices Quindell used for the PSD were not appropriate.
These were mainly the accounting practices relating to revenue from noise-induced hearing loss cases and related balances.
Quindell said that under its new accounting policies the 2013 pre-tax result for the PSD should have been a loss of £55.4m. But the company had originally reported a pre-tax profit for the division of £89.5m under its old accounting practices.
It overstated 2013 PSD revenue by £108.7m, recording revenues of £294.3m instead of the £185.6m that its new accounting practices say it should have reported.
Earnings before interest, tax, depreciation and amortisation (EBITDA) for 2013 by the PSD was overstated by £113m (see table below).
If Quindell had reported its 2014 results under its old accounting policy, it would have recorded a PSD pre-tax profit of £175.1m. Under the new policy, the division made a 2014 loss of £137.2m.
PSD revenues in 2014 would have been overstated by £289.8m under the old accounting, while EBITDA would have been overstated by £300m.
2013 accounting change impact
|2013 (as previously stated) £m||2013 (revisions in accounting policy) £m||2013 (proforma) £m|
2014 accounting change impact
|2014 (old accounting policies) £m||2014 (revisions in accounting policy) £m||2014 (proforma) £m|