Corporate watchdog slaps earlypay over wrongly classified bond

BORROW now pay later entrant earlypay has been pinged by the corporate regulator after it incorrectly classified a $19.9m “non-current” unsecured corporate bond.

The Australian Securities and Investments Commission took earlypay to task for its market update where it noted the bond was non-current.

This was despite the lender lacking the “unconditional right to defer settlement for at least twelve months from the balance date”, according to ASIC.

The misstatement was picked up by ASIC’S financial reporting surveillance program.

In its announcement of the issue ASIC noted directors were responsible for the quality of financial reports.

“This includes ensuring that management produces quality financial information on a timely basis,” ASIC said.

“Companies must have appropriate processes, records and analysis to support information in the financial report.

“Companies should also apply appropriate experience and expertise, particularly in more difficult and complex areas of accounting policies and estimates.”

The sharemarket reprimand from the regulator comes as ASIC turns up the heat on other corporate players as part of its review of 2021 financial reports.

In particular ASIC said it was focusing on getting clarity around debt refinancing and correct classification between current and non-current borrowings.

Earlypay will amend the classification of the bond in its financial report for the halfyear ended December 31, 2021.

However, the company has already told to the market about the reclassification in a footnote to its announcement of a new corporate bond on November 23.

“Earlypay notes the reclassification has no impact on Net Assets, no impact on funding covenants and does not impact on profit,” the company stated.

Earlypay chief executive Daniel Riley said the company has often had bonds in the past that had an extension date and the error was corrected.

“What we’ve done is roll some investors that ASIC note relates to into the new bond,” he said.

He noted the company’s debt facilities were hovering around $400m, so the wrongly classified debt was “not a huge percentage of the overall and it doesn’t impact on any funding covenants or the current ratio”.