The eagerly awaited publication of the 31 December 2018 financial statements of the Football Association of Ireland (FAI) has been making the headlines, for all the wrong reasons, since the publication of the financial statements in early December, 2019.
For students of financial accounting and auditing, the detail contained within the FAI’s financial statements, provide excellent real life examples of concepts, which are examinable for both ACCA and CPA students.
Here is a brief sample of some of the issues arising:
- The statutory auditors Deloitte, in their audit report on the 2018 FAI accounts, were not in a position to express an opinion on the truth and fairness of financial statements as presented. CPA and ACCA Auditing Students will be aware that a disclaimer of opinion is issued when the external audit firm has been unable to gather sufficient and appropriate audit evidence and the external audit firm believes that undetected misstatements could be material and pervasive.
In the case of the FAI, the 2018 financial statements were prepared using the going concern basis of preparation, however, Deloitte were unable to obtain sufficient audit evidence to support the assumption that the FAI will continue as a going concern.
In addition, the external auditors were not able to obtain sufficient appropriate audit evidence in respect of the completeness of the liabilities of the FAI as at the reporting date of 31-12-18.
The above 2 issues led Deloitte to disclaim their opinion on the truth and fairness of the 2018 FAI accounts.
- The accounting framework adopted by the FAI in the production of the 2018 financial statements is Financial Reporting Standard 102 (FRS 102) as issued by the Financial Reporting Council (FRC). Certain sections of FRS 102, are examinable for CPA P2 Advanced Corporate Reporting.
- The Going concern basis of preparing financial statements is a key assumption and one which should be familiar to accounting and auditing students. The auditing standard relevant to going concern is ISA 570. The going concern basis, is the assumption that the entity will continue to operate for a period of 12 months from the date that the directors sign the accounts – i.e. “the foreseeable future”
The following wording from the FAI 2018 accounts is noted in relation to Going Concern – “While the Association is in the process of refinancing its balance sheet and there is uncertainty as regards when this will be finalised, the Directors believe that it is appropriate to prepare these financial statements on a going concern basis”.
The above wording illustrates that it is primarily the directors responsibility to assess the reporting entity’s ability to continue as a going concern and as a result adopt the going concern basis of preparing the current financial statements, or not, as the case may be. In the case of the FAI, the external auditors Deloitte, were not able to support the adoption of the going concern basis in the preparation of the 2018 accounts, hence the disclaimer of opinion, as set out in point 1 above.
- The tangible non current asset note reveals the depreciation policy applied by the FAI to its Training grounds, Motor Vehicles and Office, Machinery , furniture and equipment. In addition, a definition of residual value is provided. This detail should be familiar to accounting students who have studied IAS 16, Property, Plant & Equipment.
- Intangible Assets are governed by the accounting standard, IAS 38 Intangible Assets. An Intangible asset balance is recognised in the 2018 FAI accounts. Part of the Intangible asset balance is represented by contributions to New Stadium Limited in respect of the construction of the Aviva Stadium.
- Related Party Transactions are governed by International Accounting Standard 24 and International Standard on Auditing Disclosure of Related party transactions is required, as such transactions are material by their nature. In the FAI 2018 accounts, under the Related Party Transactions note (Note 20), disclosure of the total remuneration for key management personnel is made. The bridging loan provided to the FAI in 2017, by the then CEO , of €100,000 is disclosed, along with details of a personal donation provided by the former CEO to the FAI in December 2018.
There are many more matters arising in the 2018 FAI accounts, which should be of interest to Accounting and Auditing students. In addition, the perilous financial position that the FAI now finds itself in, is also due to the weak governance arrangements which have been revealed, following on from the various investigations into the FAI and responses provided by the Board of the FAI to media enquiries. For example, historically, the board of the FAI did not contain any non executive directors and a key feature of the plan to rescue the FAI is the appointment of such directors. Governance is a key topic at CPA P1 and P2 Auditing and ACCA Audit and Assurance, and Advanced Audit and Assurance.
The FAI is now “in a dogfight” to save itself with some commentators, calling for it to be disbanded entirely. Whilst efforts to rescue the FAI will play out in the early weeks and months of 2020, for students of Accounting and Auditing, the 2018 FAI accounts offer excellent insights into the application of accounting and auditing concepts in a real world scenario.
The 2018 FAI accounts are available to download at this link – https://www.fai.ie/domestic/news/2018-fai-accounts