FTSE 100 companies have been accused of using accounting trickery to hike bosses' bonuses

Emma Haslett
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The gap between different types of profits at FTSE 100 companies is at its widest since the financial crisis, a new study has shown - and companies are using it to hike bosses' pay.

Research by AJ Bell found there is a 51 per cent gap between stated and adjusted operating profits at FTSE 100 companies, the highest level in a decade. In cash terms, that gap is £54.7bn, the highest since 2012, when it topped £67bn.

Russ Mould, AJ Bell's investment director, warned some companies are booking profits in different ways to intentionally confuse investors, presenting sales figures in multiple formats of actual, underlying and constant currencies, while others use metrics "of their own choosing" in different announcements.

"[They] publish those figures first in regulatory announcements (while at least flagging that they are not based on generally accepted accounting principles)," he said. "The goal is to put a positive gloss on their figures. The end result may therefore be a higher share price (to enhance the value of executives’ shareholdings)."

He also warned some firms are using confusing metrics to help management hit targets and trigger bonuses.

"These thresholds are designed to focus executives' minds and align their interests with those of shareholders but there is a risk that they start to become an end in themselves (as rather happened at FTSE 250 house builder Bovis in 2016)," he added.

Mould said the gap between stated and adjusted operating profits had begun to creep higher at AstraZeneca, Babcock, BT, GKN, GlaxoSmithKline, Imperial Brands, ITV, Marks and Spencer and Shire.