98. Emma Mercer was the only director prepared to concede that Carillion were engaged in aggressive accounting. She told us that when she returned to the UK in April 2017, having spent three years in the Canadian part of the business, there was a "slightly more aggressive trading of the contracts than I had previously experienced in the UK".325 In further correspondence, she elaborated this could be seen in the "number and size of contracts where significant judgements were being made in relation to the recognition of uncertified revenue in construction contracts".326
99. Ms Mercer appeared to bring a level of discipline and accuracy to Carillion's accounting policies that had been severely lacking. On her return, she quickly spotted an anomaly in the way the company was classifying receivable balances on construction contracts,327 calling it "sloppy accounting".328 The board agreed that her concerns should be investigated, but shied away from a full independent review. Instead, the board invited the company's auditor, KPMG, to review work that it had previously audited and approved. KPMG agreed with the board's conclusion that although Carillion had misclassified assets, it had not misstated revenue. That review did, however, act as the trigger for the wider contract review that led to the £845 million provision in July 2017.329
100. Emma Mercer is the only Carillion director to emerge from the collapse with any credit. She demonstrated a willingness to speak the truth and challenge the status quo, fundamental qualities in a director that were not evident in any of her colleagues. Her individual actions should be taken into account by official investigations of the collapse of the company. We hope that her association with Carillion does not unfairly colour her future career.
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325 Q264 [Emma Mercer]
326 Letter from Emma Mercer to the Chairs, 5 March 2018
327 Emma Mercer's concern was that Carillion were using "negative accruals", which were netting off payables and receivables balances. Whilst KPMG confirmed this was permitted under international accounting standards on construction contracts, Carillion had a "golden rule" not to do so.
328 Carillion plc, minutes of a meeting of the Board of Directors, 15 May 2017, p 4
329 As above.