That’s what you get when you give a pubic good into private hands: One of England’s top-rated water companies is using an accounting trick to artificially inflate its balance sheet by more than a billion pounds, BBC Panorama has discovered. Severn Trent Water claims that an investment is worth £1.68bn in its accounts, when in reality it has no value to the overall business. The made-up money makes the company appear more financially robust and helps to support its bumper payouts to shareholders.
Retired auditor Stanley Root, who discovered the story, told the BBC programme:
“This is as near to an unreal transaction as you can get – that has just been made up and put into the accounts to make the accounts look better. I think it misleads the reader to think that the net assets of Severn Trent Water Limited are higher than they are and that the company is in a much healthier position than it really is. So I think the balance sheet, the financial statements, are misleading.”
