Inspired Entertainment has informed stakeholders of a delay in finalizing its financial statements for the third quarter ending September 30, 2023. This delay is attributed to the need for additional time to address certain accounting errors and to restate previously issued financial statements.
During the preparation of the financial statements, Inspired, in collaboration with its independent registered public accounting firm, KPMG LLP, identified accounting errors related to compliance with U.S. Generally Accepted Accounting Principles (GAAP) concerning the company’s policies for capitalizing software development costs.
The errors primarily relate to the application of accounting standards to projects, including the timing of capitalization for software development projects and the categorization of costs eligible for capitalization.
To ensure full U.S. GAAP compliance, the company is conducting a comprehensive review of other financial statement line items and related accounting policies. The outcome of this review is uncertain, and the company cannot determine if further adjustments will be necessary.
On November 2, 2023, the Audit Committee of the Board of Directors, in consultation with the company’s management, concluded that the previously issued audited consolidated financial statements for financial periods starting January 1, 2021, contained these identified accounting errors.
Consequently, the Audit Committee has recommended that the consolidated financial statements for these periods should not be relied upon and must undergo restatement.
Similarly, any prior reports, press releases, earnings releases, investor presentations, or other communications describing financial results or information for these periods should no longer be relied upon.
Additionally, reports from Marcum LLP, the company’s former independent registered public accounting firm, on the company’s consolidated financial statements for 2021 and 2022 are now considered unreliable.
Management acknowledges that due to these financial statement errors, one or more additional material weaknesses exist in the company’s internal control over financial reporting.
This has resulted in ineffectiveness in disclosure controls and procedures during the specified periods. The company said it is committed to implementing changes to rectify these identified material weaknesses.
In light of these accounting errors, Inspired Entertainment plans to restate its consolidated financial statements and accompanying notes for the specified periods. This information has been disclosed in a Current Report on Form 8-K submitted to the Securities and Exchange Commission (SEC) on November 8, 2023.
The adjustments to financial statement items will be detailed in expanded disclosure within the amended reports to be filed with the SEC. The company is diligently working towards completing the restatement and intends to file the necessary reports as soon as reasonably practicable.
Despite these developments, Inspired Entertainment asserts that the changes will not impact its cash position or overall business plan. The company, however, refrains from providing an estimated timeline for filing the amended reports, emphasizing its focus on completing the restatement accurately.
