Gerry Harvey Gets An ASIC Letter Along With A Stern Warning
An investigation into Gerry Harvey’s Harvey Norman retail business and their franchise network has been put on hold by the ACCC according to a letter served up earlier this week.
In a letter sent to Harvey Norman on Tuesday, the Australian Securities and Investments Commission said it did not intend to make further inquiries after querying the company’s 2016 accounts, particularly whether franchised stores should be consolidated.
But that is not the end of the story.
According to ASIC’s Doug Niven, the commission may review subsequent financial reports as part of its ongoing surveillance program of Harvey Norman.
“This letter should not be construed as providing assurance that the financial report complies with the accounting standards and other financial reporting requirements of the Corporations Act 2001,” Mr Niven said.
“Nor does this letter limit our ability to raise further concerns with Harvey Norman regarding the financial report or any of its subsequent financial reports,” he added.
According to the AFR, Harvey Norman shares have fallen more than 25 per cent over the past year due to investor concerns about the ASIC review and the potential impact of Amazon.
ASIC started reviewing Harvey Norman’s accounts last year following concerns raised by governance group Ownership Matters over the level of disclosure about the group’s relationships with franchisees.
It is believed ASIC issued an extensive list of questions to Harvey Norman earlier this year about how it accounts for loans to franchisees, where it counts franchisee fees as profit when it loans the franchises funds to pay the fees, and even to pay interest on these loans.
Mr Harvey has dismissed the suggestion that franchisee earnings should be consolidated.
However, Harvey Norman made changes to the way it treats receivables from franchisees, or loans to franchisees, in its 2017 financial report in what investors and analysts believed was a response to the ASIC investigation.
Harvey Norman reiterated on Tuesday that its financial report complied with the requirements of the Corporations Act and relevant accounting standards.