The Royal Bank of Scotland has been accused of 'racy' accounting only days before it embarks on an expected bidding war for NatWest with Bank of Scotland, writes Lucinda Kemeny. Analyst Terry Smith, who left City bank UBS following publication of his book 'Accounting for Growth', has published further research designed to show that the bank's accounting principles have flattered profits compared with rival Bank of Scotland. Among his statements, he has questioned the bank's cost/income ratio, a measure of the percentage of each pound paid out in costs, while also highlighting an apparent shift in one of RBS's assets from an investment asset to a trading asset. The asset, a Spanish supermarket, was realised last year at a value of £96m, which would have been amortised if it was treated as an investment asset. But RBS dismissed the criticism as unfounded and within current accounting standards guidelines. The bank said: 'Our accounts are produced and audited by PricewaterhouseCoopers. They follow British Bankers Association guidelines and comply with best practice.' But the timing could not be worse for the bank, which hopes to announce its bidding intentions within a few days. It is expected to bid around £26bn, trumping Bank of Scotland's £22bn, but an insider close to the deal expected BoS to react with a higher bid.
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