The UK’s Financial Conduct Authority is investigating WH Smith over concerns of potential breaches of UK Listing Principles and Rules and Disclosure and Transparency Rules.
An independent review undertaken by Deloitte LLP for FY23 to FY25 has been delivered, and the key findings identified:
– The accounting treatment for supplier income adopted by the North America division was not consistent with the Group’s stated accounting policy and consequently was not consistent with the requirements of the relevant accounting standards.
– Supplier income recognition has been overstated in North America. As a result of this finding, the Company expects prior year adjustments to be recorded;
– The overstatement of supplier income identified in the North America division is substantially a timing rather than an existence issue, and relates to the application of accounting standards; and
– The methodology and conclusion of the Internal Audit review of supplier income for FY25 across the UK and ROW Travel divisions is appropriate and supplier income has been appropriately recognised in these divisions.
The North America supplier income issue had arisen against a backdrop of a target-driven performance culture and decentralised divisional structure combined with a limited level of Group oversight of the finance processes in North America. The following factors in North America also contributed:
- Weaknesses in the composition of the finance team.
- Insufficient systems, controls, and review procedures for supplier income across commercial and finance functions.
