Real Estate Opportunities (REO) had adjusted its accounts for 2002 and 2003 to take account of losses incurred when it broke an interest-rate swap agreement.
REO, which released interim results yesterday, said it has now been advised by its auditors, KPMG, that the fair value of the swap should have been provided for as a balance sheet item and it was adjusting its accounts to reflect this.
REO's accounting policies in relation to the swap were the subject of heated debate between one of the company's larger shareholders, Mr Noel Smyth, and one of its directors, Mr Richard Barrett, at the annual meeting in Jersey in July.
Mr Smyth subsequently complained to the Jersey Financial Services Authority about the property investment company's accounting policies.
The adjustment has resulted in an increase in interest payable and similar charges of £3.4 million (€5 million) in the first half of 2003 and £84,000 for the full-year.
REO has reported a decrease in capital and total return for the period of the same amount.
In terms of the balance sheet, there has been an increase in provisions for liabilities and charges of £13.8 million in the half-year and £10.5 million in the full-year, and a decrease in net assets of a similar scale.
REO has also recorded a decrease in opening shareholders' funds of £10.4 million. Cashflow has not been affected by the restatement.
Meanwhile, REO reported a pre-tax profit of £9.5 million in the first half, down from £10.5 million at the same time last year.
The company said its net assets decreased by 1.2 per cent to £154.6 million in the period, resulting in the net asset value per share falling by 6 per cent to 40.4p.
The company said its Irish property portfolio was valued at €511.9 million at the end of June, while the value of the British portfolio, which is made up of 22 properties, was £75.9 million.
REO disposed of 21 British properties in the first half, for a total of £38.4 million, including the sale in April of 19 properties for £35.6 million.
The company has nearly £113 million at the bank but is not paying an interim dividend.
Mr Barrett said that, like other property companies of its size, it preferred to invest in property projects rather than make a payout to shareholders.
REO said base management fees, another contentious issue at the annual meeting, came to £1.3 million in the period compared to £2.5 million in the first half of 2003. This is paid to REO's largest shareholder, Treasury Holdings, for managing the company's Irish properties and pursuing development projects.
