The Bank of Queensland Limited (ASX: BOQ) share price is nudging 0.85% higher on Tuesday and is now resting at $8.30.
The BOQ share price is catching bids today on the back of an announcement from the bank before the market opened.
In the last month, shares have spiked around 6% but are down for the last year of trade.
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What did BOQ announce?
The company has made several changes in its accounting treatment of various line-items on its financial statements. Alterations have been made amid changes to reporting standards.
Following the ME Bank acquisition, several accounting adjustments must be made to account for the new source of earnings and embedded costs for BOQ's income statement.
To help shareholders get a clearer picture of the group's 'true' financial performance, "and to
facilitate meaningful comparison with prior periods", the bank has reconciled its financial statements in a pro forma statement.
The period is for the half-year ended 31 August 2021 (H2 FY21) and the half-year ended 28 February 2021 (H1 FY21).
"[The pro forma statement] has been prepared to reflect the business as it is now structured and as though it was in effect for the full comparative periods," the company said.
The bank's accounting treatment of the acquisition itself must also be reviewed, it said.
Accounting changes to impact earnings
In the set of reconciled pro-forma statements, BOQ recognises $429 million in pre-tax earnings, $296 million in cash earnings after tax, and a final $241 million in H2 FY21 statutory net profit after tax (NPAT).
It also recognises $782 million in net interest income in its pro forma result for H2 FY21, after making the accounting adjustments outlined above.
The bank was also made to revise accounting treatment of software-as-a-service (SaaS) items. Previously, Bank of Queensland could capitalise costs on SaaS arrangements by recording these as intangible assets on the balance sheet.
However, recent International Financial Reporting Standards changes have recommended the group revise this policy.
Consequently there's been an asset shift on the balance sheet, resulting in a write-down of $47 million to intangibles, but a mark-up on prepaid and deferred tax assets of $11 million each respectively.
"This results in a $25m decrease to retained earnings as at 1 September 2021," the group said in relation to the above.
But the accounting revisions don't stop there. It still has to revise how it recognises revenue and earnings from the ME Bank acquisition, due to updates on acquisition accounting. The company said:
In the 2021 Annual Report, ME Bank's net assets were recognised on a provisional assessment of their Fair Value, while BOQ continues to finalise various matters impacting the acquisition accounting entries. As a result of updates to the acquisition accounting for the combination of these businesses, FY21 intangible assets have been reduced by circa $18 million due to the SaaS policy change and other smaller updates. The restated software intangibles balance for FY21 is $382 million.
It remains to be seen the full effect of the accounting changes, and further details will be included in the bank's H1 FY22 financial results 'materials', it said today.
The bank advised it is scheduled to release its 1H22 financial results on Thursday, 14 April.
BOQ share price snapshot
The BOQ share price has struggled this year to date and is up just 2% in that time. In the last 12 months, it has slipped around 4.5% into the red.
