Beleaguered retailer Sports Direct International, which has come under fire for its workplace and accounting practices in recent weeks, has agreed to change its approach to the reporting of its international stores following the outcome of a review by the Financial Reporting Council (FRC)
The regulator said it had discussed certain issues with the company following its review of the 2015 annual report and accounts, following concerns about whether the 2015 strategic report complied with the Companies Act 2006 requirement to be balanced and comprehensive.
In its analysis, the FRC noted that there was no discussion of the development and performance of the company’s international stores in its Sports Retail division, which represent a significant part of the company’s operations in terms of the number of stores, total revenue, operating result and gross profit.
One of the company’s key performance indicators, Sports Retail like-for-like stores gross contribution, excludes stores that have not been owned by the company for the full 12 months in both periods. Therefore, in 2015 this key performance indicator excluded the contribution from the stores in Austria and the Baltic states acquired in 2014.
In addition, there was no discussion of the performance of these stores or their effect on the company’s results.
The FRC noted the continuing lack of discussion about Sports Retail’s international stores in the 2016 strategic report even though the key performance indicator of Sports Retail like-for-like stores gross contribution did include the stores in Austria and the Baltic states and this measure had decreased to (0.8%) from 7.4%.
On the basis of information provided by the company, the FRC also considered whether the aggregation of the UK and international Sports Retail stores was in accordance with IFRS 8 ‘Operating Segments’.
Following discussion with the FRC, the directors have decided to include specific commentary about Sports Retail’s international stores in its narrative reporting, including the strategic report, and to present separately segmental information about these stores in the accounts.
This has resulted in the additional information in the commentary provided in the company’s 2016 interim results, announced today, and the restatement of comparative amounts in the segmental disclosures. These changes will also be reflected in the company’s 2017 annual report and accounts that it expects to publish in August 2017.
Following the corrective action taken by the company, the FRC said regards the enquiries arising from its review of the company’s annual report and accounts for the year ended 26 April 2015, as concluded.
On 28 November 2016 the FRC announced a separate investigation under its accountancy scheme in relation to Sports Direct’s financial statements for the period ended 24 April 2016. This follows reports of an arrangement between Sports Direct and Barlin Delivery Ltd which was not disclosed as a related party in the company’s financial statements.
