The accounting watchdog Iaasa has given embattled food giant Aryzta a rap on the knuckles for failing to comply in full with accounting rules.
According to a report published by the Irish Auditing and Accounting Supervisory Authority, Aryzta did not fully comply with technical accounting requirements in relation to the impairment of assets, details on rebates and discounts given to customers and disclosures in relation to its lending agreements. Stock market analysts have been closely watching Arytza's covenants as earnings at the group fall.
"During the year (2017), the issuer breached one of the terms of its borrowing agreements (ie the net debt/ebitda ratio)," the report said. "However, the issuer was not in default. Iaasa concluded that the notes to the financial statements did not disclose, in full, the information required by IFRS 7.19 related to the breach of lending terms."
The enforcement body said that the directors gave an undertaking that future financial statements would comply, in full, with the disclosure requirements.
A spokesman for Aryzta said: "Aryzta is dedicated to high-quality financial reporting and disclosures and complied fully with all inquiries raised as part of Iaasa's review.
"The group has either already implemented Iaasa's recommendations within the half-year 2019 financial statements or will include them within the full-year 2018 Annual Report to be published on October 2018, wherever relevant."
He said that Aryzta put in place a new financing arrangement with its lenders before the expiry of the 2017 agreement. This was completed subsequent to 2017 year-end.
"This new agreement extended debt maturity to more than four years replacing the 2017 debt position described in our 2017 annual report as a current liability and therefore technically could be classified as deemed due for repayment within 12 months."
"Describing this as a technical breach of covenant ignores the refinancing before expiry of the prior refinancing agreement and the timing issue between 2017 year-end and the banking agreement which is dictated by the publication of our audited results approximately two months after the financial year end."