The accounting trick that fooled Polly Peck's investors

By Deputy editor Tim Bennett Aug 30, 2012

Tim Bennett

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Asil Nadir brought Polly Peck to its knees using a simple accounting trick that could still work today. Tim Bennett explains how you can avoid being caught out.

• Watch all of Tim's video tutorials here

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Published in Video tutorials | More articles by Tim Bennett

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  • 1. Lupulco

    (02 September 2012, 08:51PM)  Complain about this comment

    Another good article, as you rightly say most people do not go thru the full accounts.

    They, myself included, only read thru the short version. Possibly laziness, or just do not fall in love with a particular share, i.e. once it as made a reasonable profit, or the dividends are no longer attractive, we move on.

    Basic rules not to have more then 5% of our investment fund in one company, read up on any immediate news, check the company Webb site.

    What is always a problem though, one you point out, is the parent company using off shore subsidiaries to either, off-set the tax due, or muddy the waters. It is impossible to stamp this out. But if the 5 year rule of moving losses/profits up and down the years was to be scrapped and Companies paid tax a year in arrears, like us mere PAYE mortals it would help clear up company a/c’s.

    It could be done over a rolling program i.e. reduce the 5 years +/- from year 1 to 4 years +/- and then reduce it by one year every other year.

  • 2. CashisKing

    (03 September 2012, 09:25AM)  Complain about this comment

    if you don't read what's going on in a balance sheet you don't deserve to own shares...ditto cashflow and the notes to the accounts!

  • 3. Jim

    (05 September 2012, 02:10PM)  Complain about this comment

    Very interesting, I suppose its okay to look at the balance sheet but would I know what the terminology or words used to set up this investment mean?

    Anyway I'm off to remind myself about the balance sheet by watching the video, thanks.

  • 4. Tim

    (08 October 2012, 10:52AM)  Complain about this comment

    Jim - I will see if we can do a strategy page guide to balance sheets soon. Meantime, as you note, my "what is a balance sheet?" video is a good starting point. Tim.

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