Accounting treatment of GB Gas Holdings

[Parvinder Chopra]

chronology:
On 13 March 2009, GB Gas Holdings Limited acquired 3,200,000 A ordinary shares, representing a 22% interest in Secure Electrans Limited, for cash consideration of £4 million.
The 2009 accounts described Secure Electrans as an “energy technology” business and recorded it among GB Gas Holdings’ principal joint ventures and associates.
Centrica’s 2010 consolidated accounts appear to record a £4 million impairment of an interest in a joint venture. The amount and classification correspond with the £4 million investment in Secure Electrans, although the impairment entry does not expressly name the company.
Secure Electrans was no longer named in the narrative section of GB Gas Holdings’ 2010 accounts.
Despite the apparent impairment, a letter dated 19 October 2011 shows GB Gas Holdings continuing to exercise rights under the Secure Electrans shareholders’ agreement.
These documents raise legitimate questions about the relationship between the accounting impairment, the contemporaneous fundraising valuation, and GB Gas Holdings’ continuing concern regarding the Secure Electrans patent.
Did the £4 million joint-venture impairment recorded in the 2010 Centrica accounts relate to Secure Electrans Limited?
If so, was the entire £4 million investment reduced to a nil carrying value?
On what evidence, forecasts, valuation methodology and assumptions was that impairment based?
When was the impairment assessment undertaken and approved by?
Did Deloitte review or test the valuation and impairment assumptions relating specifically to Secure Electrans?
Was an independent valuation of Secure Electrans, its technology or its patent portfolio obtained before the impairment was recognised?
Why did GB Gas Holdings approve a 2011 fundraising at not less than £1.25 per share, apparently matching its own 2009 acquisition price, after the investment had apparently been impaired?
Did the proposed 2011 fundraising price imply that Secure Electrans’ issued shares continued to possess material value?
Why did GB Gas Holdings consider it necessary to obtain protection against patent-infringement proceedings involving patent GB2364420B if Secure Electrans and its investment were considered to have no recoverable value?
Were shareholders informed that, despite the apparent impairment, GB Gas Holdings remained a shareholder and continued exercising substantial contractual and patent-related rights?
Did the directors and auditors consider whether the apparent inconsistency between a nil or impaired carrying value and the 2011 fundraising price required additional disclosure?

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