By Kymberly Martin
It’s there in black and white.
“There is nothing in the article that is new that everyone does not know – it’s all normal accounting practices. Our financial accounts are all there every year in black and white.”
Harvey Norman chairman Gerry Harvey was responding to AR on a report in the Financial Review that fund managers vote against accepting the groups’ financial accounts at its November 14 annual meeting. In a report prepared by proxy firm, Ownership Matters, it questioned the retailers’ arrangements with its 673 franchisees that count property revaluations as earnings and the company’s $943 million in loans to franchisees.
“A few years ago there were changes to accounting practices on property revaluations that allowed for these to go to profit and loss but in other countries it still goes to the balance sheet,” Harvey said. “So any property price increase or decrease is included in the company profit and no tax is paid on that. In New Zealand it is not included in profit but goes into the balance sheet, increasing the balance sheet, but the net effect is exactly the same. So in Australia it goes into profit and loss and back into the balance sheet.
“It is the same for every company. It makes no difference whether it goes into the balance sheet or the profit and loss. At the end of the day it changes nothing. Everyone knows that in financial circles.”
On Wednesday, Harvey Norman announced a profit increase of 25.9%, or $23.8 million for the three months ended September 30 2016. “Harvey Norman is performing better than it has done for many years.
“In the good old days between 1987 and 2000, double every three years, if you got 25% increase three years in row it comes very close to doubling the profit over a three year period. If Harvey Norman does 25% one year and the next that is taking us back to those days. I am not saying we are doing that but we are currently doubling our profit every eight years.”