Burford Capital to spread non-cash charge over three years

Finance and asset management company Burford Capital updated the market on the one-time, non-cash charge it was planning to account for in its 2021 earnings, to reflect the potential future expense associated with certain "carry" payments that could be payable to employees in connection with future investment performance.

The AIM-traded firm previously advised that it would move to reporting under US GAAP practises beginning with the current fiscal year.

Under GAAP, Burford determined that the legal finance one-time, non-cash accrual announced in August would be applied to the 2019, 2020 and 2021 periods, as opposed to being entirely recognised in 2021.

On Thursday it said that, on further consideration of the relevant IFRS accounting treatment, it also determined that the legal finance one-time, non-cash accrual should have been applied to 2019 and 2020 as well as 2021.

There were no changes to the amount of the total charge, and thus no changes to Burford's balance sheet as at 30 June, with the board saying it solely related to the timing of recognition of the accruals for estimates of the liabilities.

The company said it would present three years of results reflecting the corrections in its annual report in March.

Given the error in reflecting the accrual, it said some previously-issued financial statements should no longer be relied on, being the audited consolidated financial statements for the years ended 31 December 2020 and 2019, and its unaudited condensed consolidated financial statements for the six-month periods ended 30 June 2021 and 2020.

The board’s audit committee said it had taken the action after discussions with the company's independent registered public accounting firm, EY.

“This remains an entirely non-cash matter; the same non-cash expense is simply being spread across 2019 and 2020 instead of being entirely recognised in 2021,” said chief executive officer Christopher Bogart.

“Indeed, the outcome of this will be to improve our reported performance in 2021, although there is no cash impact whatsoever.”

At 1043 GMT, shares in Burford Capital were up 2.25% at 773p.