Luxe Holdings was suspended on Friday because it had failed to report its financial results on time due to it uncovering a number of accounting errors in its previous years’ financial results, a statement said Friday.
The JSE pointed out on July 1 that Luxe had failed to submit its annual report within the four-month period following its year-end, as stipulated in listing requirements, and it was under threat of suspension and possible removal of the listing.
If Luxe failed to submit its results by July 31 2022, then its listing might be suspended. The results were not received and the JSE suspended the share.
Luxe said there were corrections from a number of transactions that were not accounted for in accordance with International Financial Reporting Standards (IFRS) in prior periods, the impact of which had entailed the review of various IFRS standards applied at that time.
Deluxe’s management said they believed the annual financial statements for the year ended February 28, 2021, and the statement of financial position as at March 1, 2020, should be restated to correct prior period errors.
In the years prior to 2021, the group revised its long-term strategy which included the disposal of all of its food businesses. However, suitable buyers could not be identified for Taste Food Franchising and Buon Gusto Cuisine and these entities were placed under voluntary liquidation on March 16, 2020.
From this point, the liquidator was responsible for all decision-making relating to these companies.
Luxe’s management said the company was no longer exposed, or had rights, to variable returns from its involvement with the subsidiaries and did not have the ability to affect those returns through its power over these subsidiaries.
So these should not have been consolidated in the financial results for the year ended February 28, 2021.
The effect of the consolidation resulted in the release of debt disclosed in the audited statement to February 28, 2021.
Also, as at the end of February 28, 2021, there were about 70 stores where the incorrect lease rate was used to calculate lease liabilities and right-of-use assets.
In previous years, a discount rate of 13 percent was applied throughout all leases, but each lease should have been measured as a singular agreement, entered into at the date that the obligation arose.
The group also realised an addition to goodwill in the 2017 year when it acquired Arthur Kaplan. Subsequent to the acquisition, management made an assessment on the recoverability of the goodwill. An error was noted in the discounted cash flow forecast used for the assessment of impairment. On correcting the error, it was noted that no impairment was necessary for the acquisition.
When Luxe purchased Natal Wholesale Jewellers in 2009, a deferred tax liability was recognised regarding the trademark purchased. However, in terms of the Income Tax Act, the acquisition of the trademark did not meet the requirement to claim the allowance.
In addition, the fixed asset register included various fully depreciated assets that were still in use at the end of February. 2022. It was found that the useful lives and residual values had not previously been assessed on an annual basis.
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